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Firm Dynamics Simulation Using Game-theoretic Stochastic Agents

In: The Complex Networks of Economic Interactions

Author

Listed:
  • Yuichi Ikeda

    (Hitachi Ltd.)

  • Osamu Kubo

    (Hitachi Ltd.)

  • Yasuhiro Kobayashi

    (Hitachi Ltd.)

Abstract

Summary Decision-making is a crucial task for the business planning of industrial firms, in order to cope with uncertainties in the business environment. A method of firm dynamics simulation, i.e. the game-theoretic stochastic agent, was developed by applying game theory to a stochastic agent model in order to analyze the uncertain business environment. Each stochastic agent is described by a Langevintype equation with an additional term for rational decision-making. In this paper, the dynamics of firms in computer related industries, which consist of three industrial sectors, i.e. the large scale integrated circuit sector, the personal computer sector, and the liquid crystal display sector, are simulated using the game-theoretic stochastic agents model. Then, the importance of the herding behavior of firms is demonstrated to reproduce the formation and collapse of the bubble in the Japanese computer related industry markets during the late 90s.

Suggested Citation

  • Yuichi Ikeda & Osamu Kubo & Yasuhiro Kobayashi, 2006. "Firm Dynamics Simulation Using Game-theoretic Stochastic Agents," Lecture Notes in Economics and Mathematical Systems, in: Akira Namatame & Taisei Kaizouji & Yuuji Aruka (ed.), The Complex Networks of Economic Interactions, pages 153-162, Springer.
    • Handle: RePEc:spr:lnechp:978-3-540-28727-8_10
    DOI: 10.1007/3-540-28727-2_10
    as

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