This paper describes evolution and adaptation of an agent-based model in a version of the Diamond-Dybvig, bank-run economy. In addition to pure strategy, run and no-run equilibria, the theoretical model also has a multiplicity of sunspot equilibria where agents’ expectations and subsequent actions are driven by coordination on an extrinsic random variable. In this paper, agents that adapt using the individual evolutionary (IEL) algorithm make decisions on whether or not to follow extrinsic random variable announcement on whether to ‘wait’ (not run) or ‘withdraw’ (run). Their strategies also advise them as what to do if they do not follow the announcements. The results of simulations, that are robust for a number of different parameterizations, show ‘no-run’ and ‘run’ outcomes for low levels of strategic uncertainty. However, for high level of strategic uncertainty, the IEL agents evolve strategies that follow sunspot announcements. These results correspond to those obtained in the experiments with human subjects. Moreover, the results scale-up when the number of agents increases ten-fold and twenty-fold.
Sunspots Evolution Learning Bank runs
C63 C72 C73 D83 G20
This is a preview of subscription content, log in to check access.
Aghion P, Bacchetta P, Banerjee A (2004) A corporate balance-sheet approach to currency crises. J Econ Theory 119(1):6–30CrossRefGoogle Scholar
Anufriev M, Arifovic J, Ledyard J, Panchenko V (2011) Efficiency of Continuous Double Auctions Under Inidivdual Evolutionary Learning with Full and Limited Information. J Evol Econ 29:539–573Google Scholar
Arifovic J, Ledyard J (2007) Call market book information and efficiency. J Econ Dyn Control 31:1971–2000CrossRefGoogle Scholar
Arifovic J, Ledyard J (2010) A behavioral model for mechanism design: individual evolutionary learning. J Econ Behav Org 78:374–395CrossRefGoogle Scholar
Arifovic J, Ledyard J (2012) Individual evolutionary learning, other regarding preferences, and the voluntary contribution mechanism. J Public Econ 96:808–823CrossRefGoogle Scholar
Arifovic J, Jiang JH (2015) Do sunspots Matter? Evidence from an Experimental Study of Bank Runs, manuscriptGoogle Scholar
Arifovic J, Bullard J, Kostyshyna O (2012) Social learning and monetary policy rules. Econ J 123:38–76CrossRefGoogle Scholar
Arifovic J, Jiang JH, Xu Y (2013) Experimental evidence of bank runs as pure coordination failures. J Econ Dyn Control 37(12):2446–2465CrossRefGoogle Scholar