Firms formation and growth in the model with heterogeneous agents and monitoring
AbstractIn this article we extend the agent-based model of firms’ formation and growth proposed in . In  the firms‘ creation, expansion or contraction results from the interaction of heterogeneous utility maximizers. While the original model was able to replicate the power law distribution in the firms’ sizes agents in the model set their utility maximizing effort levels completely freely and undetected. This led to the emergence of free riding and influenced the overall dynamics of the model. Therefore we decided to extend the original model by introducing the monitoring which is seen in the economic literature, besides for example the proper incentive scheme (), as a possible way how to make employees work harder. Our motivation is to compare the extended model with both to the original case without monitoring and empirical data about firms‘ sizes distribution.
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Bibliographic InfoPaper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2008/31.
Length: 26 pages
Date of creation: Nov 2008
Date of revision: Nov 2008
monitoring; firms‘ size; power law; agent-based model; simulation; heterogeneous agents;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-07 (All new papers)
- NEP-BEC-2008-12-07 (Business Economics)
- NEP-CMP-2008-12-07 (Computational Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Alchian, Armen A & Demsetz, Harold, 1972.
"Production , Information Costs, and Economic Organization,"
American Economic Review,
American Economic Association, vol. 62(5), pages 777-95, December.
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- Robert Axtell, 1999. "The Emergence of Firms in a Population of Agents," Working Papers 99-03-019, Santa Fe Institute.
- Bohn, Henning, 1987. "Monitoring multiple agents : The role of hierarchies," Journal of Economic Behavior & Organization, Elsevier, vol. 8(2), pages 279-305, June.
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