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X-Machines for Agent-Based Modeling: FLAME Perspectives
Cournot competition model. Firms make decisions about quantity of a
product at each time step. These decisions are made concurrently and
independent of other firms. Depending on the production and the product demand in the system, the price of the product changes over time.
Stackelberg competition model. Each firm takes turns to act as a leader
and makes a decision on its production level. It is similar to playing an
extensive form game with a decision tree in game theory. The strategies can then be represented as a decision flow showing firms making
decisions one after the other [83].
Bertrand competition model. Similar to the Cournot model in assumptions and design, Bertrand firms decide how much they want to produce
in the beginning and do not change their production throughout the
simulation. Only the price is changed to adjust the profits collected by
the firms [22].
The models are based on mathematical equations and carry large numbers
of assumptions to work in practise.
• All production is sold even if it is given away for negative prices.
• These models of competition are all theoretical models involving mathematical calculations to explain the firm behaviors.
• These models come close to explaining the emergence of monopolies
when one firm dominates the market through changes in supply and
demand in real market behavior.
• All models assume an equilibrium which all firms will strive to achieve.
The Cournot [44] model is a simple economic model involving firms competing against each other for quantities they produce, to achieve high profit.
The firms produce one homogeneous product and based on the demand in the
system the price of the product changes. The characteristics of a supply and
demand curve are shown in Figure 6.6. When the supply of product increases,
it reduces the demand as there is an increase in abundance in the system.
The supply and demand curves have an inverse relationship with each
other. The point ‘E ’ at which the two curves intersect is the equilibrium of
the system. At equilibrium, the demand allows the product to cost the optimum market price, known as the market clearing price ‘Pe’, and the optimum
quantity of the product ‘Qe’. Equilibrium in a market scenario is defined as “a
situation in which plans of buyers and sellers exactly mesh, causing the quantity supplied to equal the quantity demanded at price in the market place for
the good (product)” [128].
The Cournot model uses the supply and demand curve, where demand
and quantities of the product determine the price. Figure 6.7 depicts a diagrammatic representation of the algorithm as a series of steps followed in the
Cournot model. The model carries a number of assumptions:
X-Machines for Agent-Based Modeling: FLAME Perspectives
Cournot competition model. Firms make decisions about quantity of a
product at each time step. These decisions are made concurrently and
independent of other firms. Depending on the production and the product demand in the system, the price of the product changes over time.
Stackelberg competition model. Each firm takes turns to act as a leader
and makes a decision on its production level. It is similar to playing an
extensive form game with a decision tree in game theory. The strategies can then be represented as a decision flow showing firms making
decisions one after the other [83].
Bertrand competition model. Similar to the Cournot model in assumptions and design, Bertrand firms decide how much they want to produce
in the beginning and do not change their production throughout the
simulation. Only the price is changed to adjust the profits collected by
the firms [22].
The models are based on mathematical equations and carry large numbers
of assumptions to work in practise.
• All production is sold even if it is given away for negative prices.
• These models of competition are all theoretical models involving mathematical calculations to explain the firm behaviors.
• These models come close to explaining the emergence of monopolies
when one firm dominates the market through changes in supply and
demand in real market behavior.
• All models assume an equilibrium which all firms will strive to achieve.
The Cournot [44] model is a simple economic model involving firms competing against each other for quantities they produce, to achieve high profit.
The firms produce one homogeneous product and based on the demand in the
system the price of the product changes. The characteristics of a supply and
demand curve are shown in Figure 6.6. When the supply of product increases,
it reduces the demand as there is an increase in abundance in the system.
The supply and demand curves have an inverse relationship with each
other. The point ‘E ’ at which the two curves intersect is the equilibrium of
the system. At equilibrium, the demand allows the product to cost the optimum market price, known as the market clearing price ‘Pe’, and the optimum
quantity of the product ‘Qe’. Equilibrium in a market scenario is defined as “a
situation in which plans of buyers and sellers exactly mesh, causing the quantity supplied to equal the quantity demanded at price in the market place for
the good (product)” [128].
The Cournot model uses the supply and demand curve, where demand
and quantities of the product determine the price. Figure 6.7 depicts a diagrammatic representation of the algorithm as a series of steps followed in the
Cournot model. The model carries a number of assumptions: