Agent-based modelling in economics
Lynne Hamill and Nigel Gilbert, Centre for Research in Social Simulation (CRESS), University of Surrey, UK
New methods of economic modelling have been sought as a result of the global economic downturn in 2008.This unique book highlights the benefits of an agent-based modelling (ABM) approach. It demonstrates how ABM can easily handle complexity: heterogeneous people, households and firms interacting dynamically. Unlike traditional methods, ABM does not require people or firms to optimise or economic systems to reach equilibrium. ABM offers a way to link micro foundations directly to the macro situation.
- Introduces the concept of agent-based modelling and shows how it differs from existing approaches.
- Provides a theoretical and methodological rationale for using ABM in economics, along with practical advice on how to design and create the models.
- Each chapter starts with a short summary of the relevant economic theory and then shows how to apply ABM.
- Explores both topics covered in basic economics textbooks and current important policy themes; unemployment, exchange rates, banking and environmental issues.
- Describes the models in pseudocode, enabling the reader to develop programs in their chosen language.
- Supported by a website featuring the NetLogo models described in the book.
Agent-based Modelling in Economics provides students and researchers with the skills to design, implement, and analyze agent-based models. Third year undergraduate, master and doctoral students, faculty and professional economists will find this book an invaluable resource.
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About the Author
Nigel Gilbert, Professor of Sociology and Director of CRESS, University of Surrey, UK.
Lynne Hamill, Centre of Research in Social Simulation (CRESS), University of Surrey, UK.
Table of Contents
Preface viiiCopyright notices ix1 Why agent-based modelling is useful for economists 11.1 Introduction 11.2 A very brief history of economic modelling 11.3 What is ABM? 41.4 The three themes of this book 51.5 Details of chapters 6References 92 Starting agent-based modelling 112.1 Introduction 112.2 A simple market: the basic model 122.3 The basic framework 132.4 Enhancing the basic model: adding prices 182.5 Enhancing the model: selecting traders 212.6 Final enhancement: more economically rational agents 232.7 Running experiments 252.8 Discussion 26Appendix 2.A The example model: full version 27References 283 Heterogeneous demand 293.1 Introduction 293.2 Modelling basic consumer demand theory 303.3 Practical demand modelling 393.4 Discussion 43Appendix 3.A How to do it 46References 524 Social demand 534.1 Introduction 534.2 Social networks 534.3 Threshold models 564.4 Adoption of innovative products 624.5 Case study: household adoption of fixed-line phones in Britain 644.6 Discussion 70Appendix 4.A How to do it 70References 785 Benefits of barter 805.1 Introduction 805.2 One-to-one barter 815.3 Red Cross parcels 885.4 Discussion 96Appendix 5.A How to do it 97References 1046 The market 1056.1 Introduction 1056.2 Cournot–Nash model 1056.3 Market model 1086.4 Digital world model 1176.5 Discussion 124Appendix 6.A How to do it 125References 1317 Labour market 1327.1 Introduction 1327.2 A simple labour market model 1427.3 Discussion 151Appendix 7.A How to do it 155References 1618 International trade 1638.1 Introduction 1638.2 Models 1728.3 Discussion 183Appendix 8.A How to do it 185References 1879 Banking 1899.1 Introduction 1899.2 The banking model 1989.3 Discussion 206Appendix 9.A How to do it 209References 21210 Tragedy of the commons 21410.1 Introduction 21410.2 Model 21810.3 Discussion 225Appendix 10.A How to do it 228References 23211 Summary and conclusions 23411.1 Introduction 23411.2 The models 23411.3 What makes a good model? 23711.4 Pros and cons of ABM 238References 239Index 242