Agent-Based Computational Economics
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Definition of the Subject
Mainstream economic models typically make the assumption that an entire group of agents, e.g., “investors,” can be modeled with a single “rational representative agent.” While this assumption has proven extremely useful in advancing the science of economics by yielding analytically tractable models, it is clear that the assumption is not realistic: people are different one from the other in their tastes, beliefs, and sophistication, and as many psychological studies have shown, they often deviate from rationality in systematic ways.
Agent-based computational economics is a framework allowing economics to expand beyond the realm of the “rational representative agent.” Modeling and simulating the behavior of each agent and the interaction among agents agent-based simulation allows us to investigate the dynamics of complex economic systems with many heterogeneous and not necessarily fully rational agents.
The agent-based simulation approach allows economists to...
Keywordsmicroscopic simulation agent-based simulation financial markets bounded rationality heterogeneous expectations
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Books and Reviews
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