Share Email Print

Proceedings Paper

Adaptive interactive profit expectations using small world networks and runtime weighted model averaging
Author(s): Paul William Bell
Format Member Price Non-Member Price
PDF $17.00 $21.00

Paper Abstract

The aim of this paper is to simulate profit expectations as an emergent property using an agent based model. The paper builds upon adaptive expectations, interactive expectations and small world networks, combining them into a single adaptive interactive profit expectations model (AIE). Understanding the diffusion of interactive expectations is aided by using a network to simulate the flow of information between firms. The AIE model is tested against a profit expectations survey. The paper introduces "runtime weighted model averaging" and the "pressure to change profit expectations index" (px). Runtime weighted model averaging combines the Bayesian Information Criteria and Kolmogorov's Complexity to enhance the prediction performance of models with varying complexity but a fixed number of parameters. The px is a subjective measure representing decision making in the face of uncertainty. The paper benchmarks the AIE model against the rational expectations hypothesis, finding the firms may have adequate memory although the interactive component of AIE model needs improvement. Additionally the paper investigates the efficacy of a tuneable network and equilibrium averaging. The tuneable network produces widely spaced multiple equilibria and runtime weighted model averaging improves prediction but there are issues with calibration.

Paper Details

Date Published: 30 December 2008
PDF: 12 pages
Proc. SPIE 7270, Biomedical Applications of Micro- and Nanoengineering IV and Complex Systems, 727011 (30 December 2008); doi: 10.1117/12.813941
Show Author Affiliations
Paul William Bell, The Univ. of Queensland (Australia)

Published in SPIE Proceedings Vol. 7270:
Biomedical Applications of Micro- and Nanoengineering IV and Complex Systems
Dan V. Nicolau; Guy Metcalfe, Editor(s)

© SPIE. Terms of Use
Back to Top
Sign in to read the full article
Create a free SPIE account to get access to
premium articles and original research
Forgot your username?