Adaptive interactive profit expectations using small world networks and runtime weighted model averaging

Bell, William Paul (2008) Adaptive interactive profit expectations using small world networks and runtime weighted model averaging. Proceedings of SPIE (The International Society for Optical Engineering), 7270 727011-1-727011-12. doi:10.1117/12.813941


Author Bell, William Paul
Title Adaptive interactive profit expectations using small world networks and runtime weighted model averaging
Journal name Proceedings of SPIE (The International Society for Optical Engineering)
ISSN 1605-7422
ISBN 9780819475220
Publication date 2008-12-30
Sub-type Article (original research)
DOI 10.1117/12.813941
Open Access Status Not yet assessed
Volume 7270
Start page 727011-1
End page 727011-12
Total pages 12
Editor Dan V. Nicolau
Guy Metcalfe
Place of publication Bellingham, Washington, U.S.A.
Publisher S P I E - International Society for Optical Engineering
Language eng
Formatted 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 “optimal calibration model averaging” and the “pressure to change profit expectations index” (px). Optimal calibration model averaging is an adaptation of “model averaging” to enhance the prediction performance of multiple equilibria models. The px is a subjective measure representing decision making in the face of uncertainty.
The paper benchmarks the AIE model against the adaptive expectations model and 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. Finding the tuneable network produces widely spaced multiple equilibria and the optimal calibration model averaging enhances calibration but not prediction. Further research includes disaggregating the AIE model, using an input–output table to reflect the intensity of interaction between firms of different divisions, and supplementing optimal calibration model averaging with runtime weighted model averaging.

Keyword Expectations
Interactive
Adaptive
Business Cycle
Profit
Networks
Agent based model
Australia
Surveys
Equilibria Averaging
Q-Index Code CX
Q-Index Status Provisional Code

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
 
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Created: Sat, 27 Sep 2008, 18:42:36 EST by Mr Paul Bell on behalf of School of Communication and Arts