Agent-Based Model Approach to Complex Phenomena in Real Economy

TL;DR

This paper presents an agent-based model simulating firm and bank interactions to analyze complex economic phenomena, incorporating profit maximization, bankruptcy risks, and information delays, with results aligning with real-world observations.

Contribution

It introduces a novel agent-based framework capturing firm heterogeneity and dynamic interactions through a bank, enhancing understanding of economic fluctuations.

Findings

Firms exhibit heterogeneous behaviors over time.

Bank-firm interactions influence market stability.

Simulation results align with empirical economic data.

Abstract

An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize its expected profit with possible risks in market. Infinite growth of a firm directed by the "profit maximization" principle is suppressed by a concept of "going concern". Possibility of bankruptcy of firms is also introduced by incorporating a retardation effect of information on firms' decision. The firms, mutually interacting through the monopolistic bank, become heterogeneous in the course of temporal evolution. Statistical properties of firms' dynamics obtained by simulations based on the model are discussed in light of observations in the real economy.