Firms formation and growth in the model with heterogeneous agents and monitoring

Peter Marko () and Petr Svarc ()
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Peter Marko: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/
Petr Svarc: Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, http://www.utia.cas.cz/

No 2008/31, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: In this article we extend the agent-based model of firms’ formation and growth proposed in [4]. In [4] the firms‘ creation, expansion or contraction results from the interaction of heterogeneous utility maximizers. While the original model was able to replicate the power law distribution in the firms’ sizes agents in the model set their utility maximizing effort levels completely freely and undetected. This led to the emergence of free riding and influenced the overall dynamics of the model. Therefore we decided to extend the original model by introducing the monitoring which is seen in the economic literature, besides for example the proper incentive scheme ([18]), as a possible way how to make employees work harder. Our motivation is to compare the extended model with both to the original case without monitoring and empirical data about firms‘ sizes distribution.

Keywords: monitoring; firms‘ size; power law; agent-based model; simulation; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: C15 C16 L11 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2008-11, Revised 2008-11
New Economics Papers: this item is included in nep-bec and nep-cmp
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