The Many Faces of Agent-Based Computational Economics: Ecology of Agents, Bottom-Up Approaches and Technical Breakthrough.

Abstract

This paper presents an overview of how agent-based computational economics (ACE) can contribute to the study of economic systems both at the macro and the micro level. It highlights the way these models can improve our understanding of social interactions and coordination mechanisms and bring into light the complex dependencies between the micro and the macro level. In a first part, the differences and the complementary nature between ACE and other quantitative methods (orthodox and coming from other disciplines) are underlined. A second part presents the importance of ACE for a better understanding of the functioning of markets. ABM allows to simulate heterogeneous agents and different types of interactions, between individuals, between individuals and institutions, between institutions. The specific characteristics of the goods are identified and the market design can vary. Based on the analysis of various markets, this discussion brings fresh insights to a broader and very long-standing debate about the conditions of efficiency of market structures.

Keywords: agent-based model; social interactions; heterogeneity

JEL Classification: B41, C60, C63