A Generic Framework for a Combined Agent-based Market and Production Model

Bas Straatman (), Danielle Marceau and Roger White

Computational Economics, 2013, vol. 41, issue 4, 425-445

Abstract: Agent-based market models are in general based on a-priori defined supply and demand schemes. Likewise, production models assume that prices are known a-priori. In reality prices depend on variable demands and supplies, while demand and supply depend on variable prices, and these two processes are interconnected. This paper describes a model that for the first time simulates a combined agent-based double auction market and production model. The model is built around von Neumann technology matrices (von Neumann, Rev Econ Stud 13(1):1–9, 1946 ) which provide the links between products. Agents possess one or more technologies to produce products from other products. They trade in order to acquire the inputs and sell in order to generate revenue, and the price is determined by a process of negotiation between buyers and sellers. The algorithm of negotiation is based on Cliff’s Zero Intelligence Plus approach (Cliff, Minimal-intelligence agents for bargaining behaviors in market-based environments. Technical report, School of Cognitive and Computing Sciences, University of Sussex, 1997 ), but instead of a single commodity with fixed limit prices the agents change their limit prices for multiple products based on the simulated economic situation. The combination of production and market provides a simple but complete bottom-up model framework for microeconomics. As the results show, the model employs a price mechanism that results in an appropriate allocation of resources without a central command. Copyright Springer Science+Business Media New York 2013

Keywords: Agent-based computational economics; Von Neumann technology matrices; Markets; Price mechanism; Invisible hand (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10614-012-9341-z

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