Agent-based modelling in economics

259 Pages·2015·6.377 MB·English

by  Gilbert, G. Nigel, Hamill, Lynne

Agent‐Based Modelling
in Economics

Agent‐Based Modelling
in Economics
Lynne Hamill and Nigel Gilbert
Centre for Research in Social Simulation (CRESS),
University of Surrey, UK
This edition first published 2016
© 2016 John Wiley & Sons, Ltd.
Registered Office
John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom
For details of our global editorial offices, for customer services and for information about how to apply for
permission to reuse the copyright material in this book please see our website at www.wiley.com.
The right of the author to be identified as the author of this work has been asserted in accordance with the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of
the publisher.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may
not be available in electronic books.
Designations used by companies to distinguish their products are often claimed as trademarks. All brand
names and product names used in this book are trade names, service marks, trademarks or registered
trademarks of their respective owners. The publisher is not associated with any product or vendor
mentioned in this book.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts
in preparing this book, they make no representations or warranties with respect to the accuracy
or completeness of the contents of this book and specifically disclaim any implied warranties of
merchantability or fitness for a particular purpose. It is sold on the understanding that the publisher is
not engaged in rendering professional services and neither the publisher nor the author shall be liable for
damages arising herefrom. If professional advice or other expert assistance is required, the services of a
competent professional should be sought.
Library of Congress Cataloging‐in‐Publication data applied for
ISBN: 9781118456071
A catalogue record for this book is available from the British Library.
Set in 9/11pt Times by SPi Global, Pondicherry, India
1 2016
Contents
Preface viii
Copyright notices ix
1 Why agent‐based modelling is useful for economists 1
1.1 Introduction 1
1.2 A very brief history of economic modelling 1
1.3 What is ABM? 4
1.4 The three themes of this book 5
1.5 Details of chapters 6
References 9
2 Starting agent‐based modelling 11
2.1 Introduction 11
2.2 A simple market: the basic model 12
2.3 The basic framework 13
2.4 Enhancing the basic model: adding prices 18
2.5 Enhancing the model: selecting traders 21
2.6 Final enhancement: more economically rational agents 23
2.7 Running experiments 25
2.8 Discussion 26
Appendix 2.A The example model: full version 27
References 28
3 Heterogeneous demand 29
3.1 Introduction 29
3.2 Modelling basic consumer demand theory 30
3.3 Practical demand modelling 39
3.4 Discussion 43
Appendix 3.A How to do it 46
References 52
vi ConTEnTs
4 Social demand 53
4.1 Introduction 53
4.2 social networks 53
4.3 Threshold models 56
4.4 Adoption of innovative products 62
4.5 Case study: household adoption of fixed‐line
phones in Britain 64
4.6 Discussion 70
Appendix 4.A How to do it 70
References 78
5 Benefits of barter 80
5.1 Introduction 80
5.2 one‐to‐one barter 81
5.3 Red Cross parcels 88
5.4 Discussion 96
Appendix 5.A How to do it 97
References 104
6 The market 105
6.1 Introduction 105
6.2 Cournot–nash model 105
6.3 Market model 108
6.4 Digital world model 117
6.5 Discussion 124
Appendix 6.A How to do it 125
References 131
7 Labour market 132
7.1 Introduction 132
7.2 A simple labour market model 142
7.3 Discussion 151
Appendix 7.A How to do it 155
References 161
8 International trade 163
8.1 Introduction 163
8.2 Models 172
8.3 Discussion 183
Appendix 8.A How to do it 185
References 187
ConTEnTs vii
9 Banking 189
9.1 Introduction 189
9.2 The banking model 198
9.3 Discussion 206
Appendix 9.A How to do it 209
References 212
10 Tragedy of the commons 214
10.1 Introduction 214
10.2 Model 218
10.3 Discussion 225
Appendix 10.A How to do it 228
References 232
11 Summary and conclusions 234
11.1 Introduction 234
11.2 The models 234
11.3 What makes a good model? 237
11.4 Pros and cons of ABM 238
References 239
Index 242
Preface
This book is an introduction to the power of using agent‐based modelling (ABM) in
economics. This is sometimes referred to as multi‐agent modelling and in the context of
economics, ACE, standing for Agent‐based Computational Economics.
The book takes some of the usual topics covered in an undergraduate economics
textbook and demonstrates how ABM can complement more traditional approaches to
economic modelling and better link the micro and the macro.
This book is designed to appeal to:
• Trained economists who want an introduction to ABM
• Masters and doctoral students and researchers considering using ABM in their
research
• Students in their third year of undergraduate study, either as the primary reading
for a self‐contained module on simulation approaches or as a starting point for an
undergraduate dissertation.
We expect that most readers will be familiar with the basics of standard economics, up
to the equivalent of a second‐year undergraduate, but throughout, we give pointers to where
more background can be found.
Thanks to colleagues in CRESS – Jen Badham, Tina Balke and Peter Johnson – and to
Paul Levine and Creighton Redman.