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The Promises and Perils of Agent-Based Computational Economics

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  • Matteo Richiardi

Abstract

In this paper I review the main strengths and weaknesses of agent-based computational models. In particular I rationalise the main theoretical critiques, which point to the following problematic areas: (i) interpretation of the simulation dynamics, (ii) estimation of the simulation model, and (iii) generalisation of the results. I show that there exist solutions for all these issues. Moreover, this paper clarifies some confounding differences in terminology between the computer science and the economic literature.

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Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 29.

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Length: 23 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:cca:wplabo:29
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Keywords: Agent-based; Simulation; Microsimulation; Computational Economics; Structural Estimation; Economic methodology.;

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Find related papers by JEL classification:
  • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
  • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
  • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
  • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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  1. Manuel S. Santos & Adrian Peralta-Alva, 2005. "Accuracy of Simulations for Stochastic Dynamic Models," Econometrica, Econometric Society, vol. 73(6), pages 1939-1976, November.
  2. Matteo Richiardi, 2007. "Agent-based Computational Economics. A Short Introduction," LABORatorio R. Revelli Working Papers Series 69, LABORatorio R. Revelli, Centre for Employment Studies.
  3. Daniel Ackerberg, 2009. "A new use of importance sampling to reduce computational burden in simulation estimation," Quantitative Marketing and Economics, Springer, vol. 7(4), pages 343-376, December.
  4. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
  5. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  6. Alan P. Kirman, 1995. "Economies with Interacting Agents," Discussion Paper Serie A 500, University of Bonn, Germany.
  7. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Leigh Tesfatsion & Mark Pingle, 2003. "Evolution of Worker-Employer Networks and Behaviors Under Alternative Non-Employment Benefits: An Agent-Based Computational Study," Computing in Economics and Finance 2003 7, Society for Computational Economics.
  9. Chris Goldspink, 2002. "Methodological Implications of Complex Systems Approaches to Sociality: Simulation As a Foundation for Knowledge," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 5(1), pages 3.
  10. David Hendry & Maozu Lu & Grayham E. Mizon, 2001. "Model Identification and Non-unique Structure," Economics Papers 2002-W10, Economics Group, Nuffield College, University of Oxford.
  11. Nigel Gilbert & Pietro Terna, 2000. "How to build and use agent-based models in social science," Mind and Society: Cognitive Studies in Economics and Social Sciences, Fondazione Rosselli, vol. 1(1), pages 57-72, March.
  12. Matteo Richiardi, 2004. "The Promises and Perils of Agent-Based Computational Economics," Computational Economics 0401001, EconWPA.
  13. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  14. Weisbuch, Gerard & Alan Kirman & Dorothea K. Herreiner, 1996. "Market Organization," Discussion Paper Serie B 391, University of Bonn, Germany.
  15. Steven Stern, 1997. "Simulation-Based Estimation," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 2006-2039, December.
  16. Robert Axelrod, 1997. "Advancing the Art of Simulation in the Social Sciences," Working Papers 97-05-048, Santa Fe Institute.
  17. Freeman, Richard B., 1998. "War of the models: Which labour market institutions for the 21st century?1," Labour Economics, Elsevier, vol. 5(1), pages 1-24, March.
  18. repec:dgr:kubcen:199752 is not listed on IDEAS
  19. Roberto Leombruni, 2002. "The Methodological Status of Agent-Based Simulations," LABORatorio R. Revelli Working Papers Series 19, LABORatorio R. Revelli, Centre for Employment Studies.
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Cited by:

  1. Giorgio Fagiolo & Paul Windrum & Alessio Moneta, 2006. "Empirical Validation of Agent Based Models: A Critical Survey," LEM Papers Series 2006/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Matteo Richiardi, 2003. "On the Use of Agent-Based Simulations," LABORatorio R. Revelli Working Papers Series 32, LABORatorio R. Revelli, Centre for Employment Studies.
  3. Paul Windrum & Giorgio Fagiolo & Alessio Moneta, 2007. "Empirical Validation of Agent-Based Models: Alternatives and Prospects," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 10(2), pages 8.
  4. Schuster, Stephan, 2012. "Applications in Agent-Based Computational Economics," MPRA Paper 47201, University Library of Munich, Germany.
  5. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.
  6. Nils ROLOFF & Ulrike LEHR & Wolfram KREWITT & Gerhard FUCHS & Sandra WASSERMANN & Wolfganf WEIMER-JEHLE & Bernd SCHMIDT, . "Success Determinants for Technological Innovations in the Energy Sector - The Case of Photovoltaics," EcoMod2008 23800118, EcoMod.
  7. Matteo Richiardi, 2003. "The Promises and Perils of Agent-Based Computational Economics," LABORatorio R. Revelli Working Papers Series 29, LABORatorio R. Revelli, Centre for Employment Studies.
  8. Giorgio Fagiolo & Alessio Moneta & Paul Windrum, 2007. "A Critical Guide to Empirical Validation of Agent-Based Models in Economics: Methodologies, Procedures, and Open Problems," Computational Economics, Society for Computational Economics, vol. 30(3), pages 195-226, October.

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