ACE Models of Endogenous Interactions

Various approaches used in Agent-based Computational Economics (ACE) to model endogenously determined interactions between agents are discussed. This concerns models in which agents not only (learn how to) play some (market or other) game, but also (learn to) decide with whom to do that (or not).Endogenous interaction, Agent-based Computational Economics (ACE)

A model of market-making

The two essential features of a decentralized economy taken into account are, first, that individual agents need some information about other agents in order to meet potential trading partners, which requires some communication or interaction between these agents, and second, that in general agents will face trading uncertainty. We consider trade in a homogeneous commodity. Firms decide upon their effective supplies, and may create their own markets by sending information signals communicating their willingness to sell. Meeting of potential trading partners is arranged in the form of shopping by consumers. The questions to be considered are: How do firms compete in such markets? And what are the properties of an equilibrium? We establish existence conditions for a symmetric Nash equilibrium in the firms' strategies, and analyze its characteristics. The developed framework appears to lend itself well to study many typical phenomena of decentralized economies, such as the emergence of central markets, the role of middlemen, and price-making.Decentralized trade, market--making, communication, trading uncertainty, Leex

Does eeasoning enhance learning?

Utilizing the well-known Ultimatum Game, this note presents the following phenomenon. If we start with simple stimulus-response agents, learning through naive reinforcement, and then grant them some introspective capabilities, we get outcomes that are not closer but farther away from the fully introspective game-theoretic approach. The cause of this is the following: there is an asymmetry in the information that agents can deduce from their experience, and this leads to a bias in their learning process.Ultimatum game, game theory, reasoning, reinforcement learning, Leex

An experimental study of adaptive behavior in an oligopolistic market game

We consider an oligopolistic market game, in which the players are competing firm in the same market of a homogeneous consumption good. The consumer side is represented by a fixed demand function. The firms decide how much to produce of a perishable consumption good, and they decide upon a number of information signals to be sent into the population in order to attract customers. Due to the minimal information provided, the players do not have a well--specified model of their environment. Our main objective is to characterize the adaptive behavior of the players in such a situation.Market game, oligopoly, adaptive behavior, learning, Leex

The Regional Economic Effects of Immigration

The effects of immigration on the host country are pervasive and long-term. It is not surprising that they have been extensively analysed, not least the economic effects which have been the subject of both theoretical and empirical research. While some of the empirical research has had a regional dimension, this has often been incidental to the analysis of the labour market – the effects of immigration on wages and employment prospects of the native-born depend on the regional migration response. In contrast, there has been little analysis of the general effects of immigration on regional economies per se. This paper contributes to the filling of this gap by constructing a small two-region computable general-equilibrium (CGE) model which is used to analyse the effects of various immigration shocks on regional variables such as output, employment, the labour force, unemployment, wages and welfare. We simulate the effects of different types of immigration shocks and distinguish between short-run and long-run effects. We also consider the effectiveness of government intervention designed to alleviate the adverse regional effects of immigration including the possibility that regional governments behave in a welfare-maximising way.immigration, regional, labour market

An Analysis of the Effects of Fiscal Equalisation in a Two-Region Simulation Model

This paper is concerned primarily with the economic and welfare consequences of federal redistributive grants. We use a model which has two regions, each with households, firms and regional governments as well as a federal government. The households, firms and regional governments are all optimizers – households maximize utility, firms maximize profits and we assume that regional governments are empire-builders in that they choose their expenditure and tax levels so as to maximise total expenditure – the size of their empire. Labour is free to move between regions in response to utility differences and does so until such differences have been eliminated. Inter-regional migration, interregional trade flows and federal government redistribution are the main sources of interconnectedness between the two regions. The model is linearised in log-differences and simulated using a calibration based on Australian state-level data. We find that the welfare effect of intergovernmental transfers is trivial but that all other variables of interest change substantially – consumption, employment, prices, taxes, wages, output and government expenditure. Finally, the signs of the effects of a federal transfer are not affected by the empire-building behaviour of regional governments although the magnitude of the effects is generally dampened.

Schelling's Spatial Proximity Model of Segregation Revisited

Schelling [1969, 1971a, 1971b, 1978] presented a microeconomic model showing how an integrated city could unravel to a rather segregated city, notwithstanding relatively mild assumptions concerning the individual agents' preferences, i.e., no agent preferring the resulting segregation. We examine the robustness of Schelling's model, focusing in particular on its driving force: the individual preferences. We show that even if all individual agents have a strict preference for perfect integration, best-response dynamics will lead to segregation. What is more, we argue that the one-dimensional and two-dimensional versions of Schelling's spatial proximity model are in fact two qualitatively very different models of segregation.Neighborhood segregation, Myopic Nash Equilibria, Best-response dynamics, Markov chain, Limit-behavior.

On the Behavior of Proposers in Ultimatum Games

We demonstrate that one should not expect convergence of the proposals to the subgame perfect Nash equilibrium offer in standard ultimatum games. First, imposing strict experimental control of the behavior of the receiving players and focusing on the behavior of the proposers, we show experimentally that proposers do not learn to make the expected-payoff-maximizing offer. Second, considering a range of learning theories (from optimal to boundedly rational), we explain that this is an inherent feature of the learning task faced by the proposers, and we provide some insights into the actual learning behavior of the experimental subjects. This explanation for the lack of convergence to the subgame perfect Nash equilibrium in ultimatum games complements most alternative explanations.Ultimatum game, Non-equilibrium behavior, Laboratory experiment, Multi-armed bandit, Optimal learning, Gittins index, Bounded rationality

On the Behavior of Proposers in Ultimatum Games

We demonstrate that one should not expect convergence of the proposals to the subgame perfect Nash equilibrium offer in standard ultimatum games. First, imposing strict experimental control of the behavior of the receiving players and focusing on the behavior of the proposers, we show experimentally that proposers do not learn to make the expected-payoff-maximizing offer. Second, considering a range of learning theories (from optimal to boundedly rational), we explain that this is an inherent feature of the learning task faced by the proposers, and we provide some insights into the actual learning behavior of the experimental subjects. This explanation for the lack of convergence to the subgame perfect Nash equilibrium in ultimatum games complements most alternative explanations.Ultimatum game, Non-equilibrium behavior, Laboratory experiment, Multi-armed bandit, Optimal learning, Gittins index, Bounded rationality

Imitation of succesful behavior in Cournot markets

In an experimental standard Cournot Oligopoly we test the importance of models of behavior characterized by imitation of succesful behavior. We find that the players appear to the rather reluctant to imitate.Oligopoly, cournot, bounded rationality, spite effect, Leex