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Agent-based modeling for decision making in economics under uncertainty

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  • Vermeulen, Ben
  • Pyka, Andreas

Abstract

Ever since the emergence of economics as a distinct scientific discipline, policy makers have turned to economic models to guide policy interventions. If policy makers seek to enhance growth of an open capitalist economy, they have to take into account, firstly, the uncertainties, inefficiencies, and market failures faced by the agents in the economy, and, secondly, the activities, network structure, and interactions in the innovation and production system. The authors discuss ins-and-outs of developing and using (encompassing and empirically calibrated) agent-based models for (i) abductive theorizing about causes for empirical realities, and (ii) evaluating effects of policy interventions. To ensure that derived policies are suitable to intervene in the real world and not just the stylization of it, they discuss validity and operationalization of agent-based models as well as interpretation of simulation results.

Suggested Citation

  • Vermeulen, Ben & Pyka, Andreas, 2016. "Agent-based modeling for decision making in economics under uncertainty," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-33.
    • Handle: RePEc:zbw:ifweej:20166
    DOI: 10.5018/economics-ejournal.ja.2016-6
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    6. Poplavskaya, Ksenia & Lago, Jesus & de Vries, Laurens, 2020. "Effect of market design on strategic bidding behavior: Model-based analysis of European electricity balancing markets," Applied Energy, Elsevier, vol. 270(C).

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    More about this item

    Keywords

    Decision making; uncertainty; rationality; agent-based model; policy instrument; innovation economics; Schumpeter;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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