Re: Rational choice theory and ABMs (was RE: Criticisms and defense of ABM)

[Yildizoglu Murat]

Do you know the PhD Thesis of Nick Vriend? He has also at least one
article pulled from this thesis (in JEDC if I remember well). 

What is the market price in the "real world", when an agent is making a
commitment and how this is aggregated in an actual price? I think that
the equilibrium market price to which you refer is just fiction any way.
You can use ABM to translate this aggregation with boundedly rational
agents who cannot necessarily form rational expectations (that are even
quite useless anyway if your system does not have any equilibrium...).

This is actually a very central point of modelling in economics. ABM has
at least the advantage of posing this problem that rational choice
theory generally prefers to ignore. Of course a world with
diseaquilibrium and bounded rationality is much more complex to analyse
and model ;-)

Regards,

Murat

le mer 06-03-2002 à 11:22, Rayman Mohamed a écrit :
> 
> You are right and I was writing too quickly and generalizing too much. Yes, 
> I am aware of bounded rationality -- in fact my model of developer behavior 
> was based on that. Let me stick to prices. The determination of prices 
> through hedonic models is based on neoclassical economics -- the three 
> axioms of rationality hold -- completeness, reflexivity, and transitivity 
> (think I got them all here). (Another less rigorous theoretical basis is to 
> just consider each attribute as "contributing" to the total value of some 
> product.) There might be stochastic variations of the neoclassical basis 
> that I am not aware of, that relax these assumptions. If so let me know.
> 
> So, I guess that I should say that in ABMs of economic agents, we cannot 
> quite get away from neoclassical economics if our model involves prices. If 
> there is a way to do it, I would appreciate knowing. (I can then fulfill my 
> promises to my dissertation committee!)
> 
> R.
> 
> 
> At 09:07 AM 3/6/2002 +0000, you wrote:
> 
> > > We may dislike rational choice theory but I am afraid that it is the only
> > > theory that has a coherent and consistent set of assumptions by which we
> > > can predict prices, and it is the theoretical/behavioral basis of hedonic
> > > prices models (a fancy term for regressions). As I see it ABMs have to be
> > > combined at some level with rational choice theory.
> >
> >It's not like there is a great deal of work involved in combining ABMs 
> >with rational choice
> >theory: one simply needs to construct the ABM to include a model of the 
> >deliberative
> >process by which agents arrive at a decision.  ABMs, in many senses, are 
> >ideal for modeling the
> >deliberative processes of boundedly rational individuals, as such 
> >individuals are typically
> >conceived of as arriving at choices by employing inductive generalizations 
> >of past
> >experiences or heuristics.  If it fit the problem at hand, you could model 
> >agents as Bayesians,
> >initially endowed with a somewhat random prior, who updated their prior in 
> >the light
> >of new experience from time to time.
> >
> >In my own work, I've modelled boundedly rational agents faced with simple
> >distribution problems (a simple version of the Nash bargaining problem and 
> >the ultimatum
> >game) as well as coordination games.  Although I typically assume that the 
> >agents
> >usually follow imitative learning rules (it makes the analysis afterwards 
> >easier), I've also modeled
> >them as using fictitious play.  There's no reason why more complex choice 
> >processes couldn't
> >be modelled.  If you can describe it, you can model it.
> >
> > From my point of view, the most natural point of contact between rational 
> > choice theory and
> >ABMs is through evolutionary game theory.  Traditional models of rational 
> >choice, i.e.,
> >von Neumann-Morgenstern game theory, lack a proper treatment of the 
> >dynamic aspect of
> >choice.  Evolutionary game theory (at least the economic interpretations a 
> >la Binmore, Samuelson,
> >and others) seeks to provide such a dynamic component, and usually assumes 
> >that agents
> >are boundedly rational.  ABMs provide a framework for a detailed study of 
> >both of
> >these elements.
> >
> >As an aside: the problem mentioned with markets points out what, to my 
> >mind, is a more interesting
> >problem for ABMs.  Namely, how does one smoothly incorporate, into a 
> >single problem, problems
> >involving group action with problems involving individual action.  One 
> >could always force upon the model
> >some way of having aggregative individual action lead to group action (if, 
> >say, 50%+1 of the group make
> >an individual choice to do X, then the group does X) but, in many cases, 
> >this requires making
> >substantive assumptions as to the causal relations holding between 
> >individuals and the group.
> >Ideally, one would like to frame very general rules of interaction which 
> >allowed group action
> >to develop out of individual action.  This is a hard problem, though.
> >
> >Cheers,
> >
> >Jason
> >
> >--
> >J. McKenzie Alexander
> >Co-ordinator, MSc in Philosophy of the Social Sciences
> >Department of Philosophy, Logic and Scientific Method
> >London School of Economics, Houghton Street, London WC2A 2AE
> 
> 
> 
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-- 
Prof. Murat Yildizoglu                  

  Institut Federatif de Recherche sur
           les Dynamiques Economiques
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