Agent-Based Models and Human Subject Experiments

This paper considers the relationship between agent-based modeling and economic decision-making experiments with human subjects. Both approaches exploit controlled ``laboratory'' conditions as a means of isolating the sources of aggregate phenomena. Research findings from laboratory studies of human subject behavior have inspired studies using artificial agents in ``computational laboratories'' and vice versa. In certain cases, both methods have been used to examine the same phenomenon. The focus of this paper is on the empirical validity of agent-based modeling approaches in terms of explaining data from human subject experiments. We also point out synergies between the two methodologies that have been exploited as well as promising new possibilities.agent-based models, human subject experiments, zero- intelligence agents, learning, evolutionary algorithms

Heterogeneous Agent Models in Economics and Finance, In: Handbook of Computational Economics II: Agent-Based Computational Economics, edited by Leigh Tesfatsion and Ken Judd , Elsevier, Amsterdam 2006, pp.1109-1186.

This chapter surveys work on dynamic heterogeneous agent models (HAMs) in economics and finance. Emphasis is given to simple models that, at least to some extent, are tractable by analytic methods in combination with computational tools. Most of these models are behavioral models with boundedly rational agents using different heuristics or rule of thumb strategies that may not be perfect, but perform reasonably well. Typically these models are highly nonlinear, e.g. due to evolutionary switching between strategies, and exhibit a wide range of dynamical behavior ranging from a unique stable steady state to complex, chaotic dynamics. Aggregation of simple interactions at the micro level may generate sophisticated structure at the macro level. Simple HAMs can explain important observed stylized facts in financial time series, such as excess volatility, high trading volume, temporary bubbles and trend following, sudden crashes and mean reversion, clustered volatility and fat tails in the returns distribution.

A Study of Zero-Out Auctions: Testbed Experiments of a Process of Allocating Private Rights to the Use of Public Property

The study examines a proposal to auction rights to land at a major airport and return the auction revenues to the winners. Experiments with such auctions are reported. New econometric models of the process are developed and evaluated

How does regulation affect innovation and technology change in the water sector in England and Wales?

This thesis examines the role of regulation in technological change in the water sector in England and Wales. Based on a combination of Social-Ecological Systems (SES) theory and the Multi-Level Perspective on technological transitions a Comparative Information-Graded Approach (CIGA) is developed in Part 1. As part of the CIGA, a series of tools is used for characterizing and evaluating the relationship between regulation and technology. In Part 2, the CIGA is applied to characterize the relationship between regulation and water innovation in England and Wales based on official publications, Environment Agency data, and interviews. In particular, 7 mechanisms are identified by which regulation affects innovation and 5 issues of trust negatively interact with innovation. As trust is established through these mechanisms, opportunities for innovation are at times sacrificed. Part 3 develops and analyses a set of models based on findings in Part 2. Dynamical systems and fictitious play analysis of a trustee game model of regulation exhibits cyclicality providing an explanation for observed cycles which create an inconsistent drive for innovation. Trustee and coordination models are evaluated in Chapter 7 highlighting how most tools struggle with the issue of technological lock-in. Chapter 8 develops a model of two innovators and a public good water technology over time, showing the role foresight plays in this context as well as the disincentive to develop it. Taken together, the CIGA characterization and modelling work provide a series of recommendations and insights into how the system of regulation affects technology change.Open Acces

Does vertical integration reduce investment reluctance in production chains? An agent-based real options approach

This paper uses an agent-based real options approach to analyze whether stronger vertical integration reduces investment reluctance in pork production. A competitive model in which firms identify optimal investment strategies by using genetic algorithms is developed. Two production systems are compared: a perfectly integrated system and a system in which firms produce either the intermediate product (piglets) or the final product (pork). Simulations show that the spot market solution and the perfectly integrated system lead to a very similar production dynamics even with limited information on production capacities. The results suggest that, from a pure real options perspective, spot markets are not significantly inferior to perfectly integrated supply chains.real options, supply chain, agent-based models, genetic algorithms, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Institutional and Behavioral Economics, Productivity Analysis,

Communication, learning and optimal monetary policy

The second part of the thesis deals with interest rate policy under inflation targeting when there is uncertainty in the term structure of interest rates emanating from unobserved, possibly volatile, market sentiments. In situations where expectations depend on the state of the economy--the rate of inflation and the level of the output gap, the central bank faces uncertainty about the degree of persistence in aggregate demand and inflation. Interestingly, the speed of learning about the degree of persistence depends on the interest rate policy followed and the resulting variability in inflation and the output gap, where higher variability speeds up learning and improves control of inflation in the long run. The analysis shows that passive and active learning scenarios have different implications for the degree of response of the rate of interest to the state of the economy and thus for the short-run conduct of monetary policy.

Stability analysis in a Bertrand duopoly with different product quality and heterogeneous expectations

We study the local stability properties of a nonlinear Bertrand duopoly with vertical differentiation and heterogeneous players under the hypotheses of both covered and uncovered markets. In the former case, the unique pure strategy Nash equilibrium can undergo a flip bifurcation when the extent of consumer's heterogeneity increases. In the latter, the quality differential determines the stability of prices over time. Numerical evidence is provided to show the occurrence of endogenous fluctuations