Using difference equations to find optimal tax structures on the SugarScape

Matthew Oremland () and Reinhard Laubenbacher

Journal of Economic Interaction and Coordination, 2014, vol. 9, issue 2, 233-253

Abstract: The use of equations to describe agent-based model dynamics allows access to mathematical theory that is not otherwise available. In particular, equation models can be effective at solving optimization problems—that is, problems concerning how an agent-based model can be most effectively steered into a particular state. In order to illustrate this strategy, we describe a modified version of the well-known SugarScape model and implement taxation. The optimization problem is to determine tax structures that minimize deaths but maximize tax income. Tax rates are dependent upon the amount of sugar available in a particular region; the rates change over time. A system of discrete difference equations is built to capture agent-based model dynamics. The equations are shown to capture the dynamics very well both with and without taxation. A multi-objective optimization technique known as Pareto optimization is then used to solve the problem. Rather than focusing on a cost function in which the two objectives are assigned weights, Pareto optimization is a heuristic method that determines a suite of solutions, each of which is optimal depending on the priorities of the researcher. In this case, Pareto optimization allows analysis of the tradeoff between taxes collected and deaths caused by taxation. The strategies contained here serve as a framework for a broad class of models. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Optimization; SugarScape; Approximation; Difference equations; C32; C61 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11403-014-0133-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jeicoo:v:9:y:2014:i:2:p:233-253

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11403/PS2

DOI: 10.1007/s11403-014-0133-5

Access Statistics for this article

Journal of Economic Interaction and Coordination is currently edited by A. Namatame, Thomas Lux and Shu-Heng Chen

More articles in Journal of Economic Interaction and Coordination from Springer, Society for Economic Science with Heterogeneous Interacting Agents Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().