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Testing Marshallian And Walrasian Instability With An Agent-Based Model

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Author Info
MARTA POSADA () (INSISOC, Universidad de Valladolid, ETS de Ingenieros Industriales, Paseo del Cauce s/n, 47011 Valladolid, Spain)
CESÁREO HERNÁNDEZ () (INSISOC, Universidad de Valladolid, ETS de Ingenieros Industriales, Paseo del Cauce s/n, 47011 Valladolid, Spain)
ADOLFO LÓPEZ-PAREDES () (INSISOC, Universidad de Valladolid, ETS de Ingenieros Industriales, Paseo del Cauce s/n, 47011 Valladolid, Spain)

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Abstract

Do the Marshallian and Walrasian models have a firm foundation on micromotives, or are they just macroabstractions that we could dispense in microeconomics? Previous evidence from experimental economics with human subjects in continuous double auction markets shows that, if the supply is downward-sloping or the demand is upward-sloping, the Marshallian stability model captures the observed phenomena but the Walrasian does not. But, of course, in human subjects experiments the basic question of what the human agents' behavior is remains open. We build an artificial agent-based model to show that the path of convergence needs more intelligence than the zero-intelligence framework. Results from experimental economics with human agents reproduced with artificial agents at a low cost and with an increase in the reliability of the experiment. Not only the existence but also the computation of the stability is relevant. These results cast a shadow on the interest of both instability concepts in economic theory.

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Publisher Info
Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Advances in Complex Systems.

Volume (Year): 11 (2008)
Issue (Month): 02 ()
Pages: 249-260
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Handle: RePEc:wsi:acsxxx:v:11:y:2008:i:02:p:249-260

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Related research
Keywords: ACE; market dynamics; artificial economics; Walrasian instability;

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This page was last updated on 2009-12-9.


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