Stylised Facts and the Contribution of Simulation to the Economic Analysis of Budgeting

The application of computer simulation as a research method raises two important questions: (1) Does simulation really offer added value over established methods? (2) How can the danger of arbitrariness caused by the extended modelling possibilities be minimised? We present the concept of stylised facts as a methodological basis for approaching these questions systematically. In particular, stylised facts provide a point of reference for a comparative analysis of models intended to explain an observable phenomenon. This is shown with reference to a recent discussion in the "economic analysis of accounting" literature where established methods, i.e. game theory, as well as computer simulations are used: the susceptibility of the "Groves mechanism" to collusion. Initially, we identify six stylised facts on the stability of collusion in empirical studies. These facts serve as a basis for the subsequent comparison of four theoretical models with reference to the above questions: (1) We find that the simulation models of Krapp and Deliano offer added value in comparison to the game theoretical models. They can be related to more stylised facts, achieve a better reproduction and exhibit far greater potential for incorporating yet unaddressed stylised facts. (2) Considered in the light of the stylised facts to which the models can be related, Deliano's simulation model exhibits considerable arbitrariness in model design and lacks information on its robustness. In contrast, Krapp demonstrates that this problem is not inherent to the method. His simulation model methodically extends its game theoretical predecessors, leaving little room for arbitrary model design or questionable parameter calibration. All in all, the stylisedfactsconcept proved to be very useful in dealing with the questions simulation researchers are confronted with. Moreover, a "research landscape" emerges from the derived stylised facts pinpointing issues yet to be addressed.Computer Simulation, Stylised Facts, Methodology, Groves Mechanism, Collusion, Game Theory

Bibliometrics, Stylized Facts and the Way Ahead: How to Build Good Social Simulation Models of Science?

This paper discusses how stylized facts derived from bibliometric studies can be used to build social simulation models of science. Based on a list of six stylized facts of science it illustrates how they can be brought into play to consolidate and direct research. Moreover, it discusses challenges such a stylized facts based approach of modeling science has to solve.Bibliometrics, Stylized Facts, Methodology, Model Comparison, Validation

Agentes computacionales y análisis económico

Simulation of systems of multiple agents and agent-based modeling deal with virtual entities that interact according to the rules of controlled environments. ereby, they help to understand the behavior of real economic agents, considering factors such us heterogeneity, spatiality, bounded rationality, among others. Many economic problems can be well modeled with significant results. is article surveys academic work on agent-based approaches in economics and highlights the promising features as well as the limitations of its implementation.La simulación de sistemas de agentes múltiples y los modelos basados en agentes utilizan entidades virtuales que interactúan siguiendo reglas en ambientes controlados, y permiten entender el comportamiento de los agentes reales considerando aspectos como la heterogeneidad, la espacialidad y la racionalidad limitada. Así se pueden modelar muchos fenómenos económicos y obtener resultados significativos. Este ensayo revisa los aportes de la economía computacional basada en agentes, destaca sus aspectos promisorios y sus limitaciones

Stylized Facts as an Instrument for Literature Review and Cumulative Information Systems Research

The accumulation of scientific knowledge is an important objective of information systems (IS) research. Although different review approaches exist in the continuum between narrative reviews and meta-analyses, most reviews in IS are narrative or descriptive—with all related drawbacks concerning objectivity and reliability—because available under¬lying sources in IS do typically not fulfil the requirements of formal approaches such as meta-analyses. To discuss how cumulative IS research can be effectively advanced using a more formalized approach fitting the current situation in IS research, in this paper, we point out the potential of stylized facts (SFs). SFs are interesting, sometimes counterintuitive patterns in empirical data that focus on the most relevant aspects of observable phenomena by abstracting from details (stylization). SFs originate from the field of economics and have been successfully used in different fields of research for years. In this paper, we discuss their potential and challenges for literature reviews in IS. We supplement our argumentation with an application example reporting our experience with SFs. Because SFs show considerable potential for cumulative research, they seem to be a promising instrument for literature reviews and especially for theory development in IS

Towards the development of stylized facts on the understandability of graphical business process models

The development of theory is one of the major tasks of every scientific discipline, and thus of Information Systems Research (ISR) as well as Business Informatics (BI). While different approaches can be used to develop theory in ISR and BI, there is one “dominant” way of IS theory development which has been described by GROVER and LYYTINEN in a recent article published in MISQ as the common “epistemic script”. The authors criticize this epistemic script for promoting a quite restricted production of IS-related knowledge. Furthermore, GROVER and LYYTINEN, identify new potential ways of overcoming the common epistemic script and propose – among others – the concept of Stylized Facts (SF) as one potential way for innovative knowledge production in ISR and BI. Against the background that we – the authors of this report – have been using Stylized Facts as a research approach for some years and can confirm the potential of this approach, the following report presents the idea and the current state of a promising comprehensive dissertation project (first author of this report) using Stylized Facts in ISR and BI which started in 2014. In the following, the idea of developing Stylized Facts regarding the understandability of graphical business process models is elaborated. Besides the presentation of an approach for a transparent development of SF, a comprehensive application example will illustrate the derivation of a SF regarding the relationships of the structuredness of business process models and the resulting model understandability

Towards the development of stylized facts on the understandability of graphical business process models

The development of theory is one of the major tasks of every scientific discipline, and thus of Information Systems Research (ISR) as well as Business Informatics (BI). While different approaches can be used to develop theory in ISR and BI, there is one “dominant” way of IS theory development which has been described by GROVER and LYYTINEN in a recent article published in MISQ as the common “epistemic script”. The authors criticize this epistemic script for promoting a quite restricted production of IS-related knowledge. Furthermore, GROVER and LYYTINEN, identify new potential ways of overcoming the common epistemic script and propose – among others – the concept of Stylized Facts (SF) as one potential way for innovative knowledge production in ISR and BI. Against the background that we – the authors of this report – have been using Stylized Facts as a research approach for some years and can confirm the potential of this approach, the following report presents the idea and the current state of a promising comprehensive dissertation project (first author of this report) using Stylized Facts in ISR and BI which started in 2014. In the following, the idea of developing Stylized Facts regarding the understandability of graphical business process models is elaborated. Besides the presentation of an approach for a transparent development of SF, a comprehensive application example will illustrate the derivation of a SF regarding the relationships of the structuredness of business process models and the resulting model understandability

Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works

“Okun’s Law” states a 3:1 proportion between percent growth in U. S. real GNP and percent decrease in the rate of unemployment. This paper argues that this ratio is actually a Pi:1 proportion, heretofore unrecognized because it is displayed through a form of mathematic / harmonic inverse. In Part One the Cartesian coordinate system is merged with the legal doctrines of actus reus (x-axis, actions) and mens rea (y-axis, thoughts). A unit circle of personal choice – including economic choice (trading vs. keeping) – may thereby be devised. This unit circle is then aggregated into a torus, half the circumference of which represents U.S. real GNP (Pi), the antipodal half-circumference its monetary value (Pi) and the radius the rate of employment necessary to its production (R = 1). Mainstream econometric analysis appears to support this theory of inverses with proximities of within 1.3%, 1.0%, 0.35%, 0.00105% and less than half a degree. In Part Two this model of Okun’s Law is connected closely to an analysis of the well-known Kondratiev Wave, a 56-year “Long Wave” of evolving social and economic relationships. This approach to macroeconomics is thereby aligned with a geometric, harmonic and trigonometric analysis of empirical data, rather than purely statistical methods

Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works

“Okun’s Law” states a 3:1 proportion between percent growth in U. S. real GNP and percent decrease in the rate of unemployment. This paper argues that this ratio is actually a Pi:1 proportion, heretofore unrecognized because it is displayed through a form of mathematic / harmonic inverse. In Part One the Cartesian coordinate system is merged with the legal doctrines of actus reus (x-axis, actions) and mens rea (y-axis, thoughts). A unit circle of personal choice – including economic choice (trading vs. keeping) – may thereby be devised. This unit circle is then aggregated into a torus, half the circumference of which represents U.S. real GNP (Pi), the antipodal half-circumference its monetary value (Pi) and the radius the rate of employment necessary to its production (R = 1). Mainstream econometric analysis appears to support this theory of inverses with proximities of within 1.3%, 1.0%, 0.35%, 0.00105% and less than half a degree. In Part Two this model of Okun’s Law is connected closely to an analysis of the well-known Kondratiev Wave, a 56-year “Long Wave” of evolving social and economic relationships. This approach to macroeconomics is thereby aligned with a geometric, harmonic and trigonometric analysis of empirical data, rather than purely statistical methods

Flexibility of multi-agent system models for rubber agroforest landscapes and social response to emerging reward mechanisms for ecosystem services in Sumatra, Indonesia

Payments for ecosystem services (PES) have been widely recognized as an innovative management approach to address both environment conservation and human welfare while serving as a policy instrument to deal with the ecosystem service (ES) trade-offs resulting from land-use/ cover change (LUCC). However, there is no solid understanding of how PES could affect the synergies and trade-offs among ES. This research focuses on the LUCC and its inherent ES trade-offs in the context of social-ecological systems (SES) that incorporates key feedbacks and processes, and explores the possible impacts of management regimes, i.e., PES schemes (e.g., eco-certification and reduced emissions from deforestation and degradation (REDD)). To address the complexity of this research, a multi-agent simulation (MAS) model (LB-LUDAS - Lubuk Beringin - Land Use DynAmics Simulator) was applied in which process-based decision-making sub-models were incorporated in the decision-making mechanism of agents. The model was developed to explore policy scenarios by quantifying the potential ES trade-offs resulting from the agents’ land-use choices and preferences. It was first implemented for the rubber agroforest landscape in Jambi Province (Sumatra), Indonesia. Species richness, carbon sequestration, opportunity costs, and decision processes such as PES adoption and future land-use preferences sub-models were incorporated to capture as much as possible the real SES of a rubber agroforest landscape. Three scenarios were simulated over a 20-year period, namely the PES scenario, the scenario land-use preference if supported by financial assistance/subsidies (SUB), and the current trend as the baseline scenario. From the simulations, the key findings show that there was a minimal land-cover change under the PES scenario, where an estimated 22% of the species richness in rubber agroforests could be conserved and 97% of the carbon emissions reduced compared to the baseline scenario. For the SUB scenario, an estimated 6% of the species richness could be conserved and 47% of the carbon emissions reduced. With regard to livelihoods, only under the PES scenario was wealth inequality reduced up to 50%. Regarding the return for land investment, the profitability of a land-use type depends considerably on each scenario; however, rubber agroforests would be highly profitable (20%) if a price premium were to be implemented under an eco-certification scheme. The main conclusions of this study are firstly, that PES schemes for rubber agroforests could offer synergies among carbon emission reduction, biodiversity and livelihoods, thus reducing the trade-offs resulting from possible land-use/cover change, and secondly that the LB-LUDAS model as an integrated and MAS model is a useful tool to capture the ES trade-offs as an emergent property of the dynamic social-ecological systems at the same time serving as a negotiation-support system tool to support the design of land-use policies. The use of process-based decision making in the LB-LUDAS model is recommended in order to incorporate intended decisions of agents in various situations. In this way, the triggers, options and temporal and spatial aspects of agents’ reactions are captured in a relatively realistic way.Flexibilität von Multi-Agenten-Modellen für Gummi-Agroforste-Landschaften und die soziale Reaktion auf die neu entstehenden Belohnungsmechanismen für Ökosystemdienstleistungen in Sumatra, Indonesien Bezahlungen für Ökosystemdienstleistungen (PES) sind weit verbreitet und anerkannt als ein Managementansatz sowohl für den Umweltschutz als auch für das menschliche Wohlbefinden. Gleichzeitig dienen sie als Politikinstrument zur Behandlung der Folgen (ES trade-offs) durch Veränderungen in der Landnutzung/-bedeckung (LUCC). Es gibt jedoch kein solides Wissen darüber, wie sich PES auf die Synergien und trade-offs zwischen den ES auswirken könnten. Der Schwerpunkt dieser Studie liegt auf den LUCC und ihren inhärenten ES trade-offs im Kontext von sozial-ökologischen Systemen (SES), die wichtige Feedbacks und Prozesse berücksichtigen. Die Studie untersucht die möglichen Auswirkungen von Managementregimen, d.h., PES-Systeme (z.B. Ökozertifizierung und reduzierte Emissionen von Entwaldung und Degradation (REDD)). Um die Komplexität des Themas zu erfassen, wurde ein Multi-Agentensimulationsmodel (MAS; LB-LUDAS - Lubuk Beringin - Land Use DynAmics Simulator) eingesetzt, in dem prozessbasierte Entscheidungs-Submodelle in den Entscheidungsmechanismus der Agenten berücksichtigt werden. Das Modell wurde entwickelt, um verschiedene Szenarien durch die Quantifizierung der potentiellen ES trade-offs, die durch die Wahl bzw. Vorlieben der Agenten hinsichtlich der Landnutzung entstehen, zu untersuchen. Es wurde zuerst für die Landschaften der Gummi-Agroforste in Jambi Provinz (Sumatra), Indonesien, eingesetzt. Sub-Modelle wie Artenvielfalt, Kohlenstoffspeicherung, Opportunitätskosten und Entscheidungsprozesse wie Anwendung von PES und zukünftige Präferenzen wurden berücksichtigt, um so weit wie möglich die tatsächlichen SES von Gummi-Agroforsten zu erfassen. Drei Szenarien wurden über eine Periode von 20 Jahren simuliert nämlich das PES-Szenario, das Szenario Landnutzungspräferenz, wenn mit finanzieller Unterstützung bzw. Subventionen (SUB), sowie der aktuelle Trend als Grundszenario. Die wichtigsten Ergebnisse der Simulationen zeigen eine minimale Veränderung der Landnutzung im PES-Szenario wobei ca. 22% der Artenvielfalt in den Gummi-Agroforsten erhalten und die Kohlenstoffemissionen um 97% reduziert werden konnten verglichen mit dem Grundszenario. Bei dem SUB-Szenario konnten ca. 6% der Artenvielfalt erhalten und die Kohlenstoffemissionen um 47% reduziert werden. Hinsichtlich der Lebensgrundlagen wurden nur beim PES-Szenario die Wohlstandsungleichheit um bis zu 50% reduziert. Bei den Renditen für Investitionen in Land hängt Wirtschaftlichkeit sehr stark vom Landnutzungstyp ab; Gummi-Agroforste wären jedoch sehr profitabel (20%) bei einem Preisaufschlag in einem Ökozertifizierungsprogramm. Die wichtigsten Schlussfolgerungen dieser Untersuchung sind erstens, dass PES-Programme für Gummi-Agroforste zu Synergien zwischen Reduzierung von Kohlenstoffemissionen und Biodiversität sowie Lebensgrundlagen führen und damit die trade-offs reduzieren, die durch mögliche Veränderungen in der Landnutzung/-bedeckung entstehen können und zweitens, dass das LB-LUDAS-Modell als integriertes sowie als MAS-Modell ein nützliches Instrument darstellt, um die ES trade-offs als eine zu Tage tretende Eigenschaft der dynamischen sozialen-ökologischen Systemen zu erfassen. Gleichzeitig dient das Modell als Instrument zur Unterstützung von Verhandlungen bei der Planung von Landnutzungsmaßnahmen. Der Einsatz prozessbasierter Entscheidungen im LB-LUDAS-Modell um geplante Entscheidungen von Agenten in verschiedenen Situationen zu berücksichtigen, wird empfohlen. Auf diese Art können die Auslöser, die Optionen sowie die zeitlichen und räumlichen Aspekte der Reaktionen der Agenten auf relativ realistische Weise erfasst werden

SMT goes ABMS: Developing Strategic Management Theory using Agent-Based Modelling and Simulation.

For the emerging complexity theory of strategy (CTS), organizations are complex adaptive systems able to co-evolve with their dynamic environments through interaction and response, rather than purely analysis and planning. A promising approach within the CTS context, is to focus on a strategic logic of opportunity pursuit, one in which the distributed decision-makers behave audaciously despite unpredictable, unstable environments. Although there is only emergent support for it, intriguingly organizations can perform better when these decision-makers ‘throw caution to the wind’ even at their own possible expense. Since traditional research methods have had difficulty showing how this can work over time, this research adopts a complementary method, agent-based modelling and simulation (ABMS), to examine this phenomenon. The simulation model developed here, CTS-SIM, is based on quite simple constructs, but it introduces a rich and novel externally driven environment and represents individual decision-makers as having autonomous perceptions but constrainable decision-making freedom. Its primary contribution is the illumination of core dynamics and causal mechanisms in the opportunity-transitioning process. During model construction the apparently simple concept of opportunity-transitioning turns out to be complex, and the apparently complex integration of exogenous and endogenous environments with all three views of opportunity pursuit in the entrepreneurship literature, turns out to be relatively simple. Simulation outcomes using NetLogo contribute to CTS by confirming the positive effects on agent performance of opportunistic transitioning among opportunities in highly dynamic environments. The simulations also reveal tensions among some of the chosen variables and tipping points in emergent behaviours, point to areas where theoretical clarity is currently lacking, provoke some interesting questions and open up useful avenues for future research and data collection using other methods and models. Guidance through numerous stylized facts, flexible methods, careful documentation and description are all intended to inspire interest and facilitate critical discussion and ongoing scientific work