e-JEMED - Issue 2
This issue has been published on September 3, 2004.
All articles in this issue have been peer-viewed through a double-blind referee system.
Article 1020: Long-run Equilibria in the Monetary Policy Game
by Agnès d'Artigues and Thierry Vignolo
We use evolutionary game theory in order to determinate the long-run behaviours in the monetary policy game. The model we present firstly assumes the government as well as the private sector are boundedly rational players. The behavioral rule of the government is imitation of the best player whereas the public decision follows adaptive expectations. We also question the relevance of the model when the public can make partly rational expectations. In the evolutionary monetary policy game defined, we find that the long-run equilibrium is Pareto-efficient when the government strategic adjustment is lower than the private sector rigidities. This result reflects that the resolution of governments to follow a strategy in the long-run have played a crucial part in the disinflation process, even if this process can generate short-run costs. Under partly rational expectations, it turns out that previous results are not modified, meaning that the results in the Barro-Gordon model further relies on the perfect rationality given to the government rather than on the rational expectations. Moreover, the low inflation strategy turns out to be credible with rational expectations in our model (once this strategy has been experienced as the best one), since the public knows the imitative process gives the low inflation strategy as the right choice.
Download the article
Article 1028: Proximity Relations, Partnership Structure and Supporting Institutions in an Agent-Based Model of an Industrial District Prototype
by Riccardo Boero, Flaminio Squazzoni
Industrial districts are complex systems based on an evolutionary network of interactions among heterogeneous, functionally integrated, complementary and localised firms. The paper describes an agent-based model that allows to investigate some theoretical hypotheses on the relation among behavioural styles of industrial district firms, different forms of proximity and of inter-firm relations, and their effect on technology and market adaptation of the industrial district as a whole. Moreover, we focus on some hypotheses on the role of partnership externalisation and the function that supporting institutions can exert as scaffolding structures able to improve effective connections between the industrial district and external environment.By using Swarm and Java programming language, we have created an industrial district prototype that allows to test some issues in the literature. Hypotheses which we concentrate upon are as follows: a) proximity relations can be a tool of technological learning for firms, but if firms are able to set up stable cooperation and coordination inter-firm structures; b)to do that, firms have to behave far from optimising-like behavioural styles; c)supporting istitutions matter as scaffolding structures between industrial districts and technology and market environment. To test the hypotheses, we have created and compared different simulation settings, where little modifications are gradually introduced in the model.Concerning the first hypotheses, the simulation outcomes show that proximity-based information is fundamental for learning and coordination of industrial firms. Different proximity metrics have different learning functions. Spatial proximity matters for circulation of relevant technological information among firms in phase of technological innovation, while organisational proximity matters for defining partnership structures able to make technological learning a collective and coordinated process. Concerning the second one, the simulation outcomes show that to transform proximity relations into learning tools what matters is the style of behaviour of ID firms. In a context of interdependence among firms, it is important that strategic industrial district firms are able to define long term partnerships with other complementary firms that should be based on commitment, cooperation, circulation of information, and mutual coordination. This is possible only if firms behave far from pure market style (short-run optimising economic agents), exchanging optimisation in a short period for adaptation in the long term, and taking care about the stability of their interaction context. Concerning the third one, the simulation outcomes show that supporting institutions matter to sustain firms in externalisation processes towards external environment.
Download the article
Article 1029: Neighborhood effects and the distribution of income in cities
by James Dow
The aim of this paper is to explain patterns of household income within an urban area. A particular pattern common to US cities is for a concentration of the poor in the inner city, with higher-income households farther out, and then lower-income households even farther out. It is the non-monotonicity of this pattern that makes it an interesting and difficult phenomenon to explain. This paper shows how this phenomenon can arise due to a mix of population growth and neighborhood effects (externalities). The paper constructs a model of a linear city with inhabitants of different incomes and with properties of varying quality. Computationally, the paper is novel by its use of an agent-based approach. Instead of modeling the city by a set of equilibrium conditions, it determines the outcome according to the decisions of a large number of individual agents, using a simulated auction market that allocates households to properties dynamically. The structure of the city evolves over time in response to the collective outcome of individual decisions. Simulation of the model finds that population growth combined with neighborhood effects can produce a non-monotonic pattern of income. Sensitivity analysis shows how the outcome depends on the characteristics of the city. In particular, it is found that the speed of population growth is very significant. This is important as US cities, particularly in the West and South, have been characterized by rapid population growth.
Download the article
All articles in this issue have been peer-viewed through a double-blind referee system.
Article 1020: Long-run Equilibria in the Monetary Policy Game
by Agnès d'Artigues and Thierry Vignolo
We use evolutionary game theory in order to determinate the long-run behaviours in the monetary policy game. The model we present firstly assumes the government as well as the private sector are boundedly rational players. The behavioral rule of the government is imitation of the best player whereas the public decision follows adaptive expectations. We also question the relevance of the model when the public can make partly rational expectations. In the evolutionary monetary policy game defined, we find that the long-run equilibrium is Pareto-efficient when the government strategic adjustment is lower than the private sector rigidities. This result reflects that the resolution of governments to follow a strategy in the long-run have played a crucial part in the disinflation process, even if this process can generate short-run costs. Under partly rational expectations, it turns out that previous results are not modified, meaning that the results in the Barro-Gordon model further relies on the perfect rationality given to the government rather than on the rational expectations. Moreover, the low inflation strategy turns out to be credible with rational expectations in our model (once this strategy has been experienced as the best one), since the public knows the imitative process gives the low inflation strategy as the right choice.
Download the article
Article 1028: Proximity Relations, Partnership Structure and Supporting Institutions in an Agent-Based Model of an Industrial District Prototype
by Riccardo Boero, Flaminio Squazzoni
Industrial districts are complex systems based on an evolutionary network of interactions among heterogeneous, functionally integrated, complementary and localised firms. The paper describes an agent-based model that allows to investigate some theoretical hypotheses on the relation among behavioural styles of industrial district firms, different forms of proximity and of inter-firm relations, and their effect on technology and market adaptation of the industrial district as a whole. Moreover, we focus on some hypotheses on the role of partnership externalisation and the function that supporting institutions can exert as scaffolding structures able to improve effective connections between the industrial district and external environment.By using Swarm and Java programming language, we have created an industrial district prototype that allows to test some issues in the literature. Hypotheses which we concentrate upon are as follows: a) proximity relations can be a tool of technological learning for firms, but if firms are able to set up stable cooperation and coordination inter-firm structures; b)to do that, firms have to behave far from optimising-like behavioural styles; c)supporting istitutions matter as scaffolding structures between industrial districts and technology and market environment. To test the hypotheses, we have created and compared different simulation settings, where little modifications are gradually introduced in the model.Concerning the first hypotheses, the simulation outcomes show that proximity-based information is fundamental for learning and coordination of industrial firms. Different proximity metrics have different learning functions. Spatial proximity matters for circulation of relevant technological information among firms in phase of technological innovation, while organisational proximity matters for defining partnership structures able to make technological learning a collective and coordinated process. Concerning the second one, the simulation outcomes show that to transform proximity relations into learning tools what matters is the style of behaviour of ID firms. In a context of interdependence among firms, it is important that strategic industrial district firms are able to define long term partnerships with other complementary firms that should be based on commitment, cooperation, circulation of information, and mutual coordination. This is possible only if firms behave far from pure market style (short-run optimising economic agents), exchanging optimisation in a short period for adaptation in the long term, and taking care about the stability of their interaction context. Concerning the third one, the simulation outcomes show that supporting institutions matter to sustain firms in externalisation processes towards external environment.
Download the article
Article 1029: Neighborhood effects and the distribution of income in cities
by James Dow
The aim of this paper is to explain patterns of household income within an urban area. A particular pattern common to US cities is for a concentration of the poor in the inner city, with higher-income households farther out, and then lower-income households even farther out. It is the non-monotonicity of this pattern that makes it an interesting and difficult phenomenon to explain. This paper shows how this phenomenon can arise due to a mix of population growth and neighborhood effects (externalities). The paper constructs a model of a linear city with inhabitants of different incomes and with properties of varying quality. Computationally, the paper is novel by its use of an agent-based approach. Instead of modeling the city by a set of equilibrium conditions, it determines the outcome according to the decisions of a large number of individual agents, using a simulated auction market that allocates households to properties dynamically. The structure of the city evolves over time in response to the collective outcome of individual decisions. Simulation of the model finds that population growth combined with neighborhood effects can produce a non-monotonic pattern of income. Sensitivity analysis shows how the outcome depends on the characteristics of the city. In particular, it is found that the speed of population growth is very significant. This is important as US cities, particularly in the West and South, have been characterized by rapid population growth.
Download the article