Convergence of Income Growth Rates in Evolutionary Agent-Based Economics

TL;DR

This paper demonstrates that in an agent-based economic model with bounded rationality and strategy imitation, income growth rates tend to converge quickly, influenced by strategy imitation based on income performance.

Contribution

It introduces a model where strategy imitation based on income growth leads to rapid convergence of income growth rates among heterogeneous agents.

Findings

Income growth rates converge quickly among agents.

Strategy imitation depends on immediate income growth feedback.

Agents adapt strategies rapidly based on observed income changes.

Abstract

We consider a heterogeneous agent-based economic model where economic agents have strictly bounded rationality and where income allocation strategies evolve through selective imitation. Income is calculated by a Cobb-Douglas type production function, and selection of strategies for imitation depends on the income growth rate they generate. We show that under these conditions, when an agent adopts a new strategy, the effect on its income growth rate is immediately visible to other agents, which allows a group of imitating agents to quickly adapt their strategies when needed.