Firms formation and growth in the model with heterogeneous agents and monitoring
In this article we extend the agent-based model of firms’ formation and growth proposed in . In  the firms‘ creation, expansion or contraction results from the interaction of heterogeneous utility maximizers. While the original model was able to replicate the power law distribution in the firms’ sizes agents in the model set their utility maximizing effort levels completely freely and undetected. This led to the emergence of free riding and influenced the overall dynamics of the model. Therefore we decided to extend the original model by introducing the monitoring which is seen in the economic literature, besides for example the proper incentive scheme (), as a possible way how to make employees work harder. Our motivation is to compare the extended model with both to the original case without monitoring and empirical data about firms‘ sizes distribution.
|Date of creation:||Nov 2008|
|Date of revision:||Nov 2008|
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- Carpenter, Jeffrey P. & Bowles, Samuel & Gintis, Herbert, 2006.
"Mutual Monitoring in Teams: Theory and Experimental Evidence on the Importance of Reciprocity,"
IZA Discussion Papers
2106, Institute for the Study of Labor (IZA).
- Jeffery Carpenter & Samuel Bowles & Herbert Gintis, 2006. "Mutual Monitoring in Teams: Theory and Experimental Evidence on the Importance of Reciprocity," Middlebury College Working Paper Series 0608, Middlebury College, Department of Economics.
- Robert Axtell, 1999. "The Emergence of Firms in a Population of Agents," Working Papers 99-03-019, Santa Fe Institute.
- Bohn, Henning, 1987. "Monitoring multiple agents : The role of hierarchies," Journal of Economic Behavior & Organization, Elsevier, vol. 8(2), pages 279-305, June.
- Armen A. Alchian & Harold Demsetz, 1971.
"Production, Information Costs and Economic Organizations,"
UCLA Economics Working Papers
10A, UCLA Department of Economics.
- Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
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