Multi-agent Models in Economics - a new tool for a new paradigm -

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Multi-agent Models in Economics- a new tool for
a new paradigm -

• Yoshinori Shiozawa
• (Osaka City University)

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Contents

• 1.Introduction
• 2.The state of the art of the economic science
• 3.The need for a paradigm shift
• 4.The merits of multi-agent models
• 5.The challenge of the U-Mart project
• 6.Some theoretical problems and difficulties to
  overcome

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A brief history of economic science

• 1st period (17601860)
• Classical economics
• Main method Literal
• 2nd period (18702000)
• Neoclasical Economics
• Main method mathematics
• 3rd period (2000 )
• Economics of complexity
• Main method Multi-Agent M.

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Framework of neoclassical economics

• Maximization
• easy formulation as an economic
• behavior (armchair economics)
• ready made mathematical tools
• Equilibrium
• demand and supply functions with prices as
  independent variables
• lack of time evolution

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Problems of mathematical formulations

• Demand function
• maximization with a linear
• constraint equivalent to knapsack
• problems NP-Complete.
• Supply function
• no price dependent function
• when production is increasing
• returns to scale.

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Computation time for the maximization
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Limits of equilibrium analysis

• Industrial products
• Stable price quantity adjustment
• Demand-supply function approach is not
  applicable.
• Financial markets
• Stock price, Exchange rate
• Prices unstable and volatile
• No real price theory

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Fluctuations of Nikkei Stock Average
(97.3.2799.4.5 500 days)
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Nikkei stock average (2002.9.5
1000-1100 CNBC)
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Nikkei Stock Average (6 o.d. interval,
87.8.199.7.27)
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Need for a paradigm shift

• bounded rationality
• programmed behavior
• variety of different agents
• sequential analysis
• fluctuations and volatility
• limits of mathematical analysis
• a new tool for the analysis

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Economic behavior (1)

• No maximum principle
• not an irrational behavior
• bounded rationality
• structure of a behavior
• Routines or programmed behavior
• a series of if then behaviors
• knowledge a set of programs
• choice of a suitable program

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Economic behaviors (2)

• Simplest cases
• C-D transformation
• Prof. Yoshida (Chuo U.)
• Rule If (conditions), then (action).
• Classifier system of Holland
• Evolution of behaviors
• Evolutionary economics
• Genetic algorithm

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Multi-agent model analysis

• characteristics of agents
• programmed behavior
• an agent with behavioral programs
• different agents
• can generate different types of
• behaviors
• behavior with different parameters
• mutual interactions
• no equilibrium situation

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U-Mart project

• An open common test bed for market experiments
• Close collaboration of economists and engineers
• A grounding to the reality
• Human and machine agents at the equal footing

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A scheme of the virtual market
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2002.9.6 (900-1100 red futures black spots)
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A short history of theU-Mart (1)

• 1998 Summer a Shiozawa's lecture in an emergence
  symposium
• 1999 Spring A panel of JAFEE
• 1999 Spring-Summer U-Mart project started
• 1999 Fall SVMP Server Specification defined
• 1999 Fall Presentation of an a plan at the SICE
  Information Groups Joint Symposium
• 2000 Spring Public demonstrations, SICE
  Intellectual System Symposium and JAFEE

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A short history of theU-Mart (2)

• 2000 August Pre U-Mart 2000 in the Emergence
  Symposium Summer School
• 2000 Fall Start of on-line release of J-30
  indices from the Mainichi Newspapers
• 2001 Spring Preparation of GUI's, Experiment on
  Internet
• 2001 Spring Workshops at JAFEE and ISAIS
• 2001 May Start of distribution of U-Mart
  education kit

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A short history of theU-Mart (3)

• 2001 Summer Start of fundamentals data release
  (Fisco)
• 2002 U-Mart as education materials (Many
  Universities)
• 2002 June UMIE2002 an International experiment at
  Casos (Carnegie-Melon U.)
• 2002 July Comparative institutional exp.
• Early 21st century Standard tool for market
  experiments?

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A result of a market session
2002.7.7 1st s. Taniguchi
Note BlackSpot index RedFutures prices
BlueVolumes
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Comparison board information, open or not?

• Taniguchi (OSU) July, 2002
• participants 28 students (divided in two groups
  as comparison gr.)
• preparatory lectures and training (4 days)
• four market sessions for two days
• comparison board information (cumulative list of
  buys and sells)

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Market clearing ratio with and without board
information, per person
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Some useful references

• U-Mart Web Page
• http//www.u-mart.econ.kyoto-u.ac.jp/
• UMIE2002
• U-Mart Kit (in Japanese)
• etc.
• Shiozawa's Web Page
• http//www.shiozawa.net/