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The Promises and Perils of Agent-Based Computational Economics

  • Matteo Richiardi

    (LABORatorio Revelli Centre for Employment Studies)

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.

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File URL: http://128.118.178.162/eps/comp/papers/0401/0401001.pdf
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Paper provided by EconWPA in its series Computational Economics with number 0401001.

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Length: 28 pages
Date of creation: 07 Jan 2004
Date of revision:
Handle: RePEc:wpa:wuwpco:0401001
Note: Type of Document - pdf; prepared on WinXP; pages: 28; figures: 2
Contact details of provider: Web page: http://128.118.178.162

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  1. Alan P. Kirman, 1994. "Economies with Interacting Agents," Working Papers 94-05-030, Santa Fe Institute.
  2. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
  3. David Hendry & Maozu Lu, 2001. "Model Identification and Non-unique Structure," Economics Series Working Papers 2002-W10, University of Oxford, Department of Economics.
  4. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  5. repec:dgr:kubcen:199752 is not listed on IDEAS
  6. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  7. Manuel S. Santos & Adrian Peralta-Alva, 2003. "Accuracy of Simulations for Stochastic Dynamic Models," Levine's Bibliography 666156000000000264, UCLA Department of Economics.
  8. Roberto Leombruni, 2002. "The Methodological Status of Agent-Based Simulations," LABORatorio R. Revelli Working Papers Series 19, LABORatorio R. Revelli, Centre for Employment Studies.
  9. Gerard Weisbuch & Alan Kirman & Dorothea Herreiner, 1995. "Market Organization," Working Papers 95-11-102, Santa Fe Institute.
  10. Matteo Richiardi, 2007. "Agent-based Computational Economics. A Short Introduction," LABORatorio R. Revelli Working Papers Series 69, LABORatorio R. Revelli, Centre for Employment Studies.
  11. 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.
  12. 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.
  13. 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.
  14. Steven Stern, 1997. "Simulation-Based Estimation," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 2006-2039, December.
  15. Robert Axelrod, 1997. "Advancing the Art of Simulation in the Social Sciences," Working Papers 97-05-048, Santa Fe Institute.
  16. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
  17. 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.
  18. 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.
  19. 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.
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