Predator–prey dynamics and density dependence are fundamental issues in ecology. We use a detailed, individual‐based model of walleye and yellow perch to investigate the effects of alternative prey and compensatory responses on predator and prey population dynamics. Our analyses focus on the numerical and developmental responses of the predator, rather than the traditional emphasis on functional responses. The extensive database for Oneida Lake, New York, USA was used to configure the model and ensure its realism. The model follows the daily growth, mortality, and spawning of individuals of each species through their lifetime. Three ecologically distinct periods in the history of Oneida Lake were simulated: baseline, high mayfly densities, and high forage fish densities. Mayflies and forage fish act as alternative prey for walleye. For model corroboration, the three periods were simulated sequentially as they occurred in Oneida Lake. Model predictions of abundances, size at age, and growth and survival rates compared favorably with Oneida Lake data. Three hypotheses suggested by the data were evaluated: alternative prey stabilizes yellow perch and walleye populations; alternative prey increases yellow perch and walleye recruitment; and density‐dependent growth and survival compensate for changes in young‐of‐the‐year mortality. Model simulations were performed under increased mayfly densities, increased forage fish densities, and increased egg mortality rates. Predicted recruitment and population stability depended on the magnitude of increased walleye prey and differed between mayflies and forage fish. Compensation was driven by density‐dependent growth, resulting in younger age at maturation and increased fecundity. We compare our results using a detailed, size‐structured model capable of numerical and developmental responses of predators to results from classical predator–prey theory. Weaknesses in the current version of the individual‐based model and knowledge gaps that require additional empirical data collection are also discussed.

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