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Economic Demand Functions in Simulation: Agent-Based Vs. Monte Carlo Approach

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Book cover Agent and Multi-Agent Systems: Technologies and Applications

Part of the book series: Smart Innovation, Systems and Technologies ((SIST,volume 38))

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Abstract

The aim of this paper is to compare an agent-based and Monte Carlo simulation of microeconomic demand functions. Marshallian demand function and Cobb-Douglas utility function are used in simulation experiments. The overall idea is to use these function as a core element in a seller-to-customer price negotiation in a trading company. Furthermore, formal model of negotiation is proposed and implemented to support the trading processes. The paper firstly presents some of the principles of agent-based and Monte Carlo simulation techniques, and demand function theory. Secondly, we present a formal model of demand functions negotiations. Lastly, we depict some of the simulation results in trading processes throughout one year of selling commodities to the consumers. The results obtained show that agent-based method is more suitable than Monte Carlo, and the demand functions could be used to predict the trading results of a company in some metrics.

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Notes

  1. 1.

    In microeconomics, the utility maximization problem is a problem, which consumers face: "How should I spend my money in order to maximize my utility?" It is a type of optimal decision problem.

  2. 2.

    The wealth effect is an economic term, referring to an increase (decrease) in spending that accompanies an increase (decrease) in perceived wealth.

  3. 3.

    Ratio of the same utility, consuming the commodities – Cobb-Douglas utility function.

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Acknowledgment

This paper was supported by the Ministry of Education, Youth and Sports Czech Republic within the Institutional Support for Long-term Development of a Research Organization in 2015.

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Authors and Affiliations

  1. School of Business Administration in Karviná, Department of Informatics and Mathematics, Silesian University in Opava, Univerzitní Nám. 1934/3, 733 40, Karviná, Czech Republic

    Roman Šperka

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  1. Roman Šperka
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Correspondence to Roman Šperka .

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Editors and Affiliations

  1. Department of Telecommunications, University of Zagreb, Faculty of Electrical Engineering and Computing, Zagreb, Croatia

    Gordan Jezic

  2. KES International, Shoreham-by-sea, United Kingdom

    Robert J. Howlett

  3. Faculty of Education, Science, Technology and Mathematics, University of Canberra, Canberra, South Australia, Australia

    Lakhmi C. Jain

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Šperka, R. (2015). Economic Demand Functions in Simulation: Agent-Based Vs. Monte Carlo Approach. In: Jezic, G., Howlett, R., Jain, L. (eds) Agent and Multi-Agent Systems: Technologies and Applications. Smart Innovation, Systems and Technologies, vol 38. Springer, Cham. https://doi.org/10.1007/978-3-319-19728-9_12

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  • DOI: https://doi.org/10.1007/978-3-319-19728-9_12

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-19727-2

  • Online ISBN: 978-3-319-19728-9

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