Agent-based Models: An Introductory Study on Decentralized Price Systems

Abstract

<p>In Chapter 1, we introduce the idea of an Agent-based model(ABM) and review some of the programming concepts that facilitate their implementation. We also discuss how ABMs may offer some help to macro model builders in getting around three key challenges: rich microfoundations, the aggregation problem and agent decision-making. In Chapter 2, we endeavour to develop a fuller understanding of a decentralized price system through the use of ABMs. We review two models in the literature to investigate how decentralized price systems have been incorporated into more elaborate setups. Appealing to the need for simplicity, we construct ABMs to examine the convergence properties of two models that appear in the disequilibrium literature: the Edgeworth model and the Hahn-Fisher model. The Edgeworth model illustrates the need to think more carefully about path-dependence. The implementation of the Hahn-Fisher model raises a question about the convergence properties of this process.</p>