Uncertainty fluctuations and multi-agent economies with equilibrium
This article discusses some issues involved in economies composed of dynamically interacting agents, who makes decisions about consumption, transformation and exchange of information, and other resources, expand their facilities, formulate their strategies in order to achieve specific aims, and their strategies are taken in an asynchronous and distributed manner. Agents may combine different roles within an economic system undergoing rapid technological and structural change in order to find adequate approaches to treating non-stationarity and uncertainty, bounded rationality of agents, rich variety, and complexity of dynamic interrelations between different agents. Internal uncertainty is due to the fact that each agent takes decisions without full knowledge about states and actions of other agents, and all agents have the flexibility to choose different behavioural patterns. Complexity leads to the multitude of positive and negative feedbacks in the system. Under different values of system parameters, these feedbacks can lead to different equilibria, and even to chaotic behaviour. In certain points the system abruptly switches between different equilibria with arbitrarily small change of itself. The bounded rationality of agents implies that their decisions on their actions result from the set of heuristics, which vary according to changing of informational patterns, environment and goals. When the agents inject money through an open market operation, only those agents that are currently trading absorb these injections, and agents must pay a fixed cost to transfer money between the asset market and the goods market. Money injections are absorbed by active agents, the injections increase active agent's current consumption. Open markets operations have been thought to have liquidity effects: money injections lead initially to a decline in short-term nominal interest rates, in the case of segmented asset markets they can produce both two different features, whereas persistent injections increase expected inflation, but have no effects on real interest rates. However, in dynamic setting and in the case of the expected utility maximizing approach, one has to distinguish between individual's utility smoothing motive and his risk aversion. The effect of tax rate uncertainty on labour supply and savings when the agent both works and saves during fluctuations is analysed.
Volume (Year): 11 (2004)
Issue (Month): 6 ()
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- Andres Erosa & Martin Gervais, 2001. "Optimal taxation in infinitely-lived agent and overlapping generations models : a review," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 23-44.
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