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Modeling economic systems as locally-constructive sequential games

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  • Leigh Tesfatsion

Abstract

Real-world economies are open-ended dynamic systems consisting of heterogeneous interacting participants. Human participants are decision-makers who strategically take into account the past actions and potential future actions of other participants. All participants are forced to be locally constructive, meaning their actions at any given time must be based on their local states; and participant actions at any given time affect future local states. Taken together, these essential properties imply real-world economies are locally-constructive sequential games. This paper discusses a modeling approach, Agent-based Computational Economics (ACE), that permits researchers to study economic systems from this point of view. ACE modeling principles and objectives are first concisely presented and explained. The remainder of the paper then highlights challenging issues and edgier explorations that ACE researchers are currently pursuing.

Suggested Citation

  • Leigh Tesfatsion, 2017. "Modeling economic systems as locally-constructive sequential games," Journal of Economic Methodology, Taylor & Francis Journals, vol. 24(4), pages 384-409, October.
    • Handle: RePEc:taf:jecmet:v:24:y:2017:i:4:p:384-409
    DOI: 10.1080/1350178X.2017.1382068
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    Cited by:

    1. Lackner, Teresa & Fierro, Luca E. & Mellacher, Patrick, 2025. "Opinion dynamics meet agent-based climate economics: An integrated analysis of carbon taxation," Journal of Economic Behavior & Organization, Elsevier, vol. 229(C).
    2. Abigail Devereaux & Roger Koppl & Stuart Kauffman, 2024. "Creative evolution in economics," Journal of Evolutionary Economics, Springer, vol. 34(2), pages 489-514, April.
    3. Gerhard Hanappi, 2017. "Agent-based modelling. History, essence, future," PSL Quarterly Review, Economia civile, vol. 70(283), pages 449-472.
    4. Abigail Devereaux, 2025. "Costs of choice: reformulating price theory without heroic assumptions," Public Choice, Springer, vol. 202(3), pages 455-481, March.
    5. Eric Innocenti & Corinne Idda & Dominique Prunetti & Pierre-Régis Gonsolin, 2022. "Agent-based modelling of a small-scale fishery in Corsica," Post-Print hal-03886619, HAL.
    6. Szymon Chudziak, 2025. "Studying economic complexity with agent-based models: advances, challenges and future perspectives," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 20(2), pages 413-449, April.
    7. Swannack, Todd M. & Cushway, Kiara C. & Carrillo, Carra C. & Calvo, Clementina & Determan, Kierra R. & Mierzejewski, Caroline M. & Quintana, Vanessa M. & Riggins, Christopher L. & Sams, Miranda D. & W, 2025. "Cracking the code: Linking good modeling and coding practices for new ecological modelers," Ecological Modelling, Elsevier, vol. 499(C).
    8. Patrick Mellacher, 2021. "Growth, Inequality and Declining Business Dynamism in a Unified Schumpeter Mark I + II Model," Papers 2111.09407, arXiv.org, revised Nov 2023.
    9. Jan Schulz & Daniel M. Mayerhoffer, 2021. "Equal chances, unequal outcomes? Network-based evolutionary learning and the industrial dynamics of superstar firms," Journal of Business Economics, Springer, vol. 91(9), pages 1357-1385, November.
    10. Koen de Koning & Tatiana Filatova & Okmyung Bin, 2019. "Capitalization of Flood Insurance and Risk Perceptions in Housing Prices: An Empirical Agent‐Based Model Approach," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1159-1179, April.
    11. D'Orazio, Paola, 2019. "Income inequality, consumer debt, and prudential regulation: An agent-based approach to study the emergence of crises and financial instability," Economic Modelling, Elsevier, vol. 82(C), pages 308-331.
    12. Claudius Gräbner & Wolfram Elsner & Alexander Lascaux, 2018. "To Trust or to Control: Informal Value Transfer Systems and Computational Analysis in Institutional Economics," Journal of Economic Issues, Taylor & Francis Journals, vol. 52(2), pages 559-569, April.
    13. Bewaji, Oluwasegun, 2024. "A computational model of bilateral credit limits in payment systems and other financial market infrastructures," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(1).
    14. An, Li & Grimm, Volker & Sullivan, Abigail & Turner II, B.L. & Malleson, Nicolas & Heppenstall, Alison & Vincenot, Christian & Robinson, Derek & Ye, Xinyue & Liu, Jianguo & Lindkvist, Emilie & Tang, W, 2021. "Challenges, tasks, and opportunities in modeling agent-based complex systems," Ecological Modelling, Elsevier, vol. 457(C).
    15. Mellacher, Patrick, 2020. "COVID-Town: An Integrated Economic-Epidemiological Agent-Based Model," MPRA Paper 103661, University Library of Munich, Germany.

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