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on Evolutionary Economics |
| By: | Giovanni Dosi; Giorgio Fagiolo; Andrea Roventini |
| Abstract: | In this paper, we present an evolutionary model of industry dynamics yielding en- dogenous business cycles with 'Keynesian' features. The model describes an economy composed of firms and consumers/workers. Firms belong to two industries. The first one performs R&D and produces heterogeneous machine tools. Firms in the second industry invest in new machines and produce a homogenous consumption good. Consumers sell their labor and fully consume their income. In line with the empirical literature on investment patterns, we assume that the investment decisions by firms are lumpy and constrained by their financial structures. Moreover, drawing from behavioral theories of the firm, we assume boundedly rational expectation formation. Simulation results show that the model is able to deliver self-sustaining patterns of growth characterized by the presence of endogenous business cycles. The model can also replicate the most important stylized facts concerning micro- and macro-economic dynamics. Indeed, we find that investment is more volatile than GDP; consumption is less volatile than GDP; investment, consumption and change in stocks are procyclical and coincident variables; employment is procyclical; unemployment rate is countercyclical; firm size distributions are skewed but depart from log-normality; firm growth distributions are tent-shaped. |
| Keywords: | Evolutionary Dynamics, Agent-Based Computational Economics, Animal Spirits, Lumpy Investment, Output Fluctuations, Endogenous Business Cycles. |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2005/04&r=evo |
| By: | Theodore Turocy (Texas A&M University) |
| Abstract: | The assumption that preferences are transitive, or, equivalently, that choice behavior satisfies the Weak Axiom of Revealed Preference, is at the core of most economic theory. While this is a natural assumption, one could ask the degree to which it is restrictive: are there objectives that could not be attained by such behavior that could be attained by choices violating the assumption? It is argued that the answer to this question is no in one setting of choice under random budget sets. |
| Keywords: | transitivity |
| JEL: | C7 D8 |
| Date: | 2005–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0505004&r=evo |
| By: | Myrna Wooders (Department of Economics, Vanderbilt University); Edward Cartwright (Department of Economics, Keynes College, University of Kent); Reinhard Selten (Department of Economics, University of Bonn) |
| Abstract: | In the literature of psychology and economics it is frequently observed that individuals tend to conform in their behavior to the behavior of similar individuals. A fundamental question is whether the outcome of such behavior can be consistent with self-interest. We propose that this consistency requires the existence of a Nash or approximate Nash equilibrium that induces a partition of the player set into relatively few societies, each consisting of similar individuals playing the same or similar strategies. In this paper we introduce a notion of a society and characterize a family of games admitting the existence of such an equilibrium. We also introduce the concept of 'crowding types' into our description of players and distinguish between the crowding type of a player -- those characteristics of a player that have direct effects on others -- and his tastes, taken to directly affect only that player. With the assumptions of 'within crowding type anonymity' and 'linearity of taste-types' we show that the number of groups can be uniformly bounded. |
| Keywords: | Behavioral conformity, noncooperative games, pregames, Nash equilibrium, purification, social norms, behavioral norms |
| JEL: | C72 Z13 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0513&r=evo |