Rethinking Macroeconomics with Endogenous Market Structure

251 Pages·2020·6.132 MB·English

by  Marco Mazzoli, Matteo Morini, Pietro Terna

Rethinking Macroeconomics with
Endogenous Market Structure

Rethinking
Macroeconomics with
Endogenous Market
Structure
MARCO MAZZOLI
UniversityofGenoa
MATTEO MORINI
UniversityofTorino
PIETRO TERNA
UniversityofTorino
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DOI:10.1017/9781108697019
(cid:2)c MarcoMazzoli,MatteoMoriniandPietroTerna2019
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LibraryofCongressCataloging-in-PublicationData
Names:Mazzoli,Marco,author.|Morini,Matteo,author.|Terna,Pietro,author.
Title:Rethinkingmacroeconomicswithendogenousmarketstructure/Marco
Mazzoli,MatteoMorini,PietroTerna.
Description:First.|NewYork:Cambridgeuniversitypress,2019.|
Includesbibliographicalreferencesandindex.
Identifiers:LCCN2019029309(print)|LCCN2019029310(ebook)|
ISBN9781108482608(hardback)|ISBN9781108697019(epub)
Subjects:LCSH:Macroeconomics–Mathematicalmodels.|Equilibrium(Economics)
Classification:LCCHB172.5.M36492019(print)|LCCHB172.5(ebook)|
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Contents
ListofIllustrations pageix
ListofTables xv
NotesonContributors xviii
Introduction 1
PartOne Theory 9
1 Industrial Structure and the Macroeconomy: A Few
PremisesforaMacromodel 11
1.1 Introduction 11
1.2 WhyaNewTheoreticalApproach 12
1.2.1 Microfoundation 14
1.2.2 MarketStructure 19
1.2.3 Expectations and Implications for the
Simulations 23
2 Industrial Structure and the Macroeconomy: The
MacroeconomicModelandItsAlgebraicFramework 26
2.1 Introduction 26
2.2 TheAlgebraicDerivationoftheAggregateDemand 28
2.3 TheFirms 39
2.4 The Incentive Compatible Wage, the Probability
ofEntryandExitandtheEmploymentLevel 48
2.5 A Digression on the Link Between the Labor
Market Equilibrium, the Firm’s Output and the
EntryDecision 55
2.6 InterpretingtheNatureoftheEquilibriuminthe
OligopolisticMarket 63
2.7 AFewEquationsSummarizingtheModelforthe
Agent-BasedSimulations 67
2.8 ConcludingRemarks 68
2.9 Technical Specifications – Entry and Output
Determination:TheExistenceofaCournot-Nash
Equilibrium 70
v
vi Contents
PartTwo Model 75
3 A Computable Market Model: The Structure of the
Agent-BasedSimulation 77
3.1 ASchemetoStart 77
3.1.1 SLAPP – Swarm-Like Agent Protocol in
Python 78
3.1.2 TheStructureoftheSimulationModel 79
3.1.3 WhatIsaCycleandWhatAreSub-Steps? 84
3.1.4 Item1:ResetAction 84
3.2 Item2:makeProductionPlanoradaptProductionPlan 84
3.2.1 makeProductionPlan 84
3.2.2 adaptProductionPlan 85
3.3 Item3:hireFireWithProduction 87
3.4 Item4:produce 87
3.4.1 Item4,Continuation:workTroubles 88
3.5 Item5:planConsumptionInValue 88
3.6 Item6:setInitialPricesHM 89
3.7 Item7:actOnMarketPlace 92
3.8 Item8:setMarketPrice 96
3.9 Item9:evaluateProfit 97
3.10 Item 10: nextSellPriceJumpFHM and
nextSellPricesQHM 98
3.10.1 Item10–full:nextSellPriceJumpFHM 98
3.10.2 Item10–quasi:nextSellPricesQHM 99
3.11 Item11:toEntrepreneurandtoWorker 102
3.11.1 Item11:toEntrepreneur 102
3.11.2 Item11:toWorker 102
3.12 Item 12: On wages: fullEmploymentEffect and
incumbentAction 103
3.12.1 Item12:fullEmploymentEffectOnWages 103
3.12.2 Item12:incumbentActionOnWages 103
4 The Results of the Simulation Agent-Based Model, in
SMACandASHAMModes 106
4.1 InitialResults,Cases0a(ginFigure4.17)and0b
(hinFigure4.17) 106
4.2 Synopsis of SMAC Experiments, from Atomistic
toOligopolisticMarkets 112
Contents vii
4.2.1 Case 1 (a in Figure 4.17): 100
Entrepreneursand100,000Workers 112
4.2.2 Case 2 (b in Figure 4.17): 1,000
Entrepreneursand100,000Workers 115
4.2.3 Case 3 (c in Figure 4.17): 10
Entrepreneursand100,000Workers 117
4.2.4 Case 4 (d in Figure 4.17): 20
Entrepreneursand100,000workers 120
4.2.5 Case 5 (e in Figure 4.17): 50
Entrepreneursand100,000Workers 123
4.2.6 Case6(f inFigure4.17):50entrepreneurs
and10,000workers 125
4.2.7 Summarizing Countercyclical Markup
PresenceinCases0ato6 127
4.2.8 Synopsis of Cases from 0a to 6, in the
SMACEconomy 127
4.3 AQualitativeAnalysisofASHAMExperiments 136
4.4 FullASHAM 138
4.4.1 Case 7: 10 Entrepreneurs and 10,000
Workers, in a Stable Economy, with an
IncreasingNumberofFirms 138
4.4.2 Case 8: 10 Entrepreneurs and 10,000
Workers,inaStableEconomy,withFirm
Dynamic 144
4.5 QuasiASHAM,withtheUnsoldOption 147
4.5.1 Case 9: 10 Entrepreneurs and 10,000
Workers, in a Nearly Stable Economy,
withaFinalTightOligopolisticStructure 147
4.6 QuasiASHAM,withtherandomUpOption 153
4.6.1 Case 10: 10 Entrepreneurs and 10,000
Workers, in a Stable Economy, with
Information Shocks and a Stable
OligopolisticStructure 154
4.7 QuasiASHAM,withtheProfitOption 158
4.7.1 Case 11: 10 Entrepreneurs and 10,000
Workers, in a Stable Economy, with a
StableOligopolisticMarket 159
4.8 Synopsis of Cases from 7 to 11, in the ASHAM
Economy 163
viii Contents
4.9 RandomValuesOnandOff,aTestintheASHAM
Environment 163
5 TheModelFacingEmpiricalData 168
Conclusions 176
Appendices 179
Appendix A The Structure of an Atomistic Simplified
HayekianMarket 181
A.1 TheStructureoftheModelandtheWarmingUp
Phase 181
A.2 TheAtomisticHayekianVersion 182
A.3 TheUnstructuredVersion 185
A.4 Two Triple Cases of Not Balancing Numbers of
BuyersandSellers 185
A.4.1 CasenBuyers (cid:3)nSellers 185
A.4.2 CasenBuyers (cid:4)nSellers 192
A.5 ActivatingIdleAgents 196
A.5.1 Corrupting the Simplified Hayekian
MarketModel 196
A.5.2 AFundamentalUnexpectedBy-Product 200
AppendixB TheAcrosticsoftheSimulationModelandIts
Parameters 203
AppendixC HowtoRuntheOligopolyModelwithSLAPP 210
C.1 TimeManagement 213
C.1.1 TheSchedule.xlsFormalism 214
C.1.2 The observerActions and modelActions
asHighLevelScheduleFormalisms 217
C.2 Running a Specific Experiment, with Backward
Compatibility 218
C.3 RunningtheCodeDirectlyOnline 220
References 221
AuthorIndex 227
SubjectIndex 228
Illustrations
3.1 Theoutlineofthesimulationmodelwithits12items page80
3.2 Casei:buyers’pricecurvewith10,000agents,ε in
B
[−0.09,0.01);sellers’pricecurvewith10agents,ε in
S
[−0.01,0.09) 82
3.3 Caseii:buyers’pricecurvewith10,000agents,ε in
B
[−0.11,−0.01);sellers’pricecurvewith10agents,ε
S
in[0.01,0.11) 82
3.4 Case iii: (a) buyers’ price curve with 10,000 agents,
ε in[−0.05,0.05);sellers’pricecurvewith10agents,
B
ε in[−0.05,0.05) 83
S
3.5 Case iii:(b) buyers’ price curve with 10,000 agents,
ε in[−0.10,0.10);sellers’pricecurvewith10agents,
B
ε in[−0.10,0.10) 83
S
4.1 Case 0a from the 2017 paper, macro-variable series
withnewentrantfirms 108
4.2 Case0afromthe2017 paper,agent serieswithnew
entrantfirms 108
4.3 Case 0b fromthe 2017 paper, macro-variable series
withoutnewentrantfirms 109
4.4 Case 0b from the 2017 paper, agent series without
newentrantfirms 109
4.5 Case 1, 100 entrepreneurs and 100,000 workers,
macro-variableseries 113
4.6 Case 1, 100 entrepreneurs and 100,000 workers,
agentseries 114
4.7 Case 2, 1,000 entrepreneurs and 100,000 workers,
macro-variableseries 116
4.8 Case 2, 1,000 entrepreneurs and 100,000 workers,
agentseries 116
4.9 Case 3, 10 entrepreneurs and 100,000 workers,
macro-variableseries 118
ix