An Agent-Based Simulation of the Stolper-Samuelson Effect

Meisser, L. & Kreuser, C.F. Computational Economics, 2016, DOI: 10.1007/s10614-016-9616-x

16 Pages Posted: 25 Jun 2016 Last revised: 3 Jan 2017

Luzius Meisser

University of Zurich - Department of Banking and Finance

Carl Friedrich Kreuser

Stellenbosch University

Date Written: June 13, 2016

Abstract

We demonstrate that agent-based simulations can exhibit results in line with classic macroeconomic theory. In particular, we present an agent-based simulation of an Arrow-Debreu economy that accurately exhibits the Stolper-Samuelson effect as an emergent property. Absent of a Walrasian auctioneer or any other central coordination, we let firm and consumer agents of different types interact in an open, money-driven market. Exogenous preference shocks result in price and wage shifts that are in accordance with the general equilibrium solution, not only qualitatively but also quantitatively with high accuracy. Key to this achievement are three independent measures. First, we overcome the poor input synchronization of conventional price finding heuristics of firms in agent-based models by introducing sensor prices, a novel approach to price finding that decouples information exploitation from information exploration. Second, we improve accuracy and convergence by employing exponential search as exploration algorithm. Third, we normalize prices indirectly by fixing dividends, thereby stabilizing the system's dynamics.

Keywords: Computational economics, agent-based economics, price finding, price normalization, sensor prices, system dynamics

JEL Classification: C63, E27

Suggested Citation

Meisser, Luzius and Kreuser, Carl Friedrich, An Agent-Based Simulation of the Stolper-Samuelson Effect (June 13, 2016). Meisser, L. & Kreuser, C.F. Computational Economics, 2016, DOI: 10.1007/s10614-016-9616-x. Available at SSRN: https://ssrn.com/abstract=2794828

Luzius Meisser (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Sch├Ânberggasse 1
Z├╝rich, 8001
Switzerland

HOME PAGE: http://meissereconomics.com

Carl Friedrich Kreuser

Stellenbosch University ( email )

Private Bag X1
Stellenbosch, Western Cape 7602
South Africa

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