A Model of Boundedly Rational Consumer Choice
The paper presents an extended version of the standard textbook problem of consumer choice. As usual, agents have to decide about their desired quantities of various consumption goods, at the same time taking into account their limited budget. Prices for the goods are not fixed but arise from a Walrasian interaction of total demand and a stylized supply function for each of the goods. After showing that this type of model cannot be solved analytically, three different types of evolutionary algorithms are set up to answer the question whether agents' behavior according to the rules of these algorithms can solve the problem of extended consumer choice. There are two important answers to this question: a) The quality of the results learned crucially depends on the elasticity of supply, which in turn is shown to be a measure of the degree of state dependency of the economic problem. b) Statistical tests suggest that for the agents in the model it is relatively easy to adhere to the budget constraint, but that it is relatively difficult to reach an optimum with marginal utility per Dollar being equal for each good.
|Date of creation:||01 Aug 2000|
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- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-1037, October.
- Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
- Arifovic, Jasmina, 1994. "Genetic algorithm learning and the cobweb model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(1), pages 3-28, January.
- Chris Birchenhall & Nikos Kastrinos & Stan Metcalfe, 1997. "Genetic algorithms in evolutionary modelling," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 375-393.
- Thomas Riechmann, 1999. "Learning and behavioral stability An economic interpretation of genetic algorithms," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 225-242.
- Riechmann, Thomas, 1997. "Learning and Behavoiral Stability - An Economic Interpretation of Genetic Algorithms," Hannover Economic Papers (HEP) dp-209, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Riechmann, Thomas, 2001. "Genetic algorithm learning and evolutionary games," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 1019-1037, June.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. Full references (including those not matched with items on IDEAS)
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