Non Price Interaction and Business Fluctuations in an Agent Based Model of Firms’ Demography

Roberto Leombruni

No 17, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: This paper presents some artificial stylised facts emerging in a simulated contestable market where firms interact with each other in taking their stay or go decision. I use nearly zero-intelligence firms: no optimisation is considered, and all the firms sell at a fixed price an equal quantity of the good. The entry of new firms is triggered by the overall profitability of the market, measured by the spread between the average rate of profit and the interest rate. The exit decision is modelled via a mean field effect, to take into account in the decision process both the performance of the individual firm, and the information about the profitability of the market that can be abduced looking at the stay or go decision of the other firms. Financial requirements of production are considered, with a spread between creditor and debtor interest rates. The model is simulated with an ACE approach, using the Swarm libraries released by the Santa Fe Institute.

Pages: 22 pages
Date: 2002
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