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

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  • Roberto Leombruni

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.

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Bibliographic Info

Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 17.

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Length: 22 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:cca:wplabo:17

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  1. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 14-31, March.
  2. Gode, Dhananjay K & Sunder, Shyam, 1997. "What Makes Markets Allocationally Efficient?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(2), pages 603-30, May.
  3. Satyajit Chatterjee & Russell W. Cooper, 1993. "Entry and exit, product variety and the business cycle," Working Papers 93-30, Federal Reserve Bank of Philadelphia.
  4. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 1127-50, September.
  5. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 559-86, June.
  6. Sheshinski, Eytan & Dreze, Jacques H, 1976. "Demand Fluctuations, Capacity Utilization, and Costs," American Economic Review, American Economic Association, American Economic Association, vol. 66(5), pages 731-42, December.
  7. Ben Bernanke & Mark Gertler, 1987. "Financial Fragility and Economic Performance," NBER Working Papers 2318, National Bureau of Economic Research, Inc.
  8. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
  9. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  10. Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 556.
  11. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 36(4), pages 1947-1982, December.
  12. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(1), pages 119-37, February.
  13. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
  14. F. Lotti & E. Santarelli, 2001. "Industry Dynamics and the Distiribution of Firm Sizes: A Non-Parametric Apporoach," Working Papers 406, Dipartimento Scienze Economiche, Universita' di Bologna.
  15. Evans, David S., 1986. "The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-33, C.V. Starr Center for Applied Economics, New York University.
  16. Bruce C. Greenwald & Joseph E. Stiglitz, 1988. "Financial Market Imperfections and Business Cycles," NBER Working Papers 2494, National Bureau of Economic Research, Inc.
  17. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 6(2), pages 117-136, Spring.
  18. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
  19. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers, Wisconsin Madison - Social Systems 7, Wisconsin Madison - Social Systems.
  20. Francesca Lotti & Enrico Santarelli, 2004. "Industry Dynamics and the Distribution of Firm Sizes: A Nonparametric Approach," Southern Economic Journal, Southern Economic Association, vol. 70(3), pages 443-466, January.
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