PROJECTION OF A HETEROGENOUS AGENT-BASED PRODUCTION ECONOMY MODEL TO A CLOSED DYNAMICS OF AGGREGATE VARIABLES

Authored by Kristian Lindgren, Emma Jonson, Liv Lundberg

Date Published: 2015

DOI: 10.1142/s0219525915500125

Sponsors: European Union

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

A model framework that describes a simple production economy is presented, in which the micro-dynamics can be projected to a closed dynamics of aggregate variables. The construction is based on an agent-based model with heterogeneity both regarding production characteristics and the strategies agents use to predict future prices as a basis for choosing what to produce. The world is divided into a number of regional markets that collect the locally produced goods and via inter-market trade supply regional demands with goods. We discuss the model features that make it possible to project the agent-based micro-dynamics to a closed form dynamics on the level of regionally aggregate quantities. One advantage of such a projection from a high dimensional agent-based dynamics to a low dimensional dynamical system is that the stability characteristics can be analytically approached, and this is illustrated by a derived condition for when a mix of naive and rational agents can stabilize the system. Some illustrations of the general framework in a model of global agricultural land-use are also given.

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Expectations Chaos Cobweb model