The Promises and Perils of Agent-Based Computational Economics
In this paper I analyse the main strengths and weaknesses of agent-based computational models. I first describe how agent-based simulations can complement more traditional modelling techniques. Then, I rationalise the main theoretical critiques against the use of simulation, 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. Along the way, I clarify some confounding differences in terminology between the computer science and the economic literature.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven Stern, 1997. "Simulation-Based Estimation," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 2006-2039, December.
- 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.
- 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.
- Manuel S. Santos & Adrian Peralta-Alva, 2005.
"Accuracy of Simulations for Stochastic Dynamic Models,"
Econometric Society, vol. 73(6), pages 1939-1976, November.
- Manuel S. Santos & Adrian Peralta-Alva, 2003. "Accuracy of Simulations for Stochastic Dynamic Models," Levine's Bibliography 666156000000000264, UCLA Department of Economics.
- Peralta Alva, Adrián & Santos, Manuel S., 2003. "Accuracy of simulations for stochastic dynamic models," UC3M Working papers. Economics we034615, Universidad Carlos III de Madrid. Departamento de Economía.
- Matteo Richiardi, 2007. "Agent-based Computational Economics. A Short Introduction," LABORatorio R. Revelli Working Papers Series 69, LABORatorio R. Revelli, Centre for Employment Studies.
- Nigel Gilbert & Pietro Terna, 2000. "How to build and use agent-based models in social science," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 1(1), pages 57-72, March.
- McFadden, Daniel, 1989.
"A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration,"
Econometric Society, vol. 57(5), pages 995-1026, September.
- 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.
- Daniel A. Ackerberg, 2001.
"A New Use of Importance Sampling to Reduce Computational Burden in Simulation Estimation,"
NBER Technical Working Papers
0273, National Bureau of Economic Research, Inc.
- Daniel Ackerberg, 2009. "A new use of importance sampling to reduce computational burden in simulation estimation," Quantitative Marketing and Economics (QME), Springer, vol. 7(4), pages 343-376, December.
- 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.
- 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.
- Alan P. Kirman, 1995.
"Economies with Interacting Agents,"
Discussion Paper Serie A
500, University of Bonn, Germany.
- Weisbuch, Gerard & Alan Kirman & Dorothea K. Herreiner, 1996.
Discussion Paper Serie B
391, University of Bonn, Germany.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Roberto Leombruni, 2002. "The Methodological Status of Agent-Based Simulations," LABORatorio R. Revelli Working Papers Series 19, LABORatorio R. Revelli, Centre for Employment Studies.
- Matteo Richiardi, 2004.
"The Promises and Perils of Agent-Based Computational Economics,"
- 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.
- Robert Axelrod, 1997. "Advancing the Art of Simulation in the Social Sciences," Working Papers 97-05-048, Santa Fe Institute.
- Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
- Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpco:0401001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.