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MODELLING COMPLEX ECONOMIC SYSTEMS WITH FUZZY LOGIC AND GENETIC ALGORITHMS

MODELLING COMPLEX ECONOMIC SYSTEMS WITH FUZZY LOGIC AND GENETIC ALGORITHMS Many economic models have, to ensure tractability, excluded qualitative and complex dynamic phenomena, focussing instead on static equilibria. This affects how accurately they reflect reality. A combination of fuzzy logic and genetic algorithms should make more complex models tractable, by allowing agents to learn their own rules for surviving and prospering. This combination was used to examine if and how a market, with firms initially trading at different prices, can reach equilibrium (problem of the Walrasian Crier). Under perfect competition, the model finds the normal static equilibrium price; under more realistic conditions, with nonlinearities and risk, it reaches a quantitatively different equilibrium. JEL Classification: C63, E13, P51 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics, Management, and Financial Markets Addleton Academic Publishers

MODELLING COMPLEX ECONOMIC SYSTEMS WITH FUZZY LOGIC AND GENETIC ALGORITHMS

PETER SMITH
Economics, Management, and Financial Markets , Volume 4 (2): 55-78 – Jan 1, 2009
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Publisher
Addleton Academic Publishers
Copyright
© 2009 Addleton Academic Publishers
ISSN
1842-3191
eISSN
1938-212X
Publisher site
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Abstract

Many economic models have, to ensure tractability, excluded qualitative and complex dynamic phenomena, focussing instead on static equilibria. This affects how accurately they reflect reality. A combination of fuzzy logic and genetic algorithms should make more complex models tractable, by allowing agents to learn their own rules for surviving and prospering. This combination was used to examine if and how a market, with firms initially trading at different prices, can reach equilibrium (problem of the Walrasian Crier). Under perfect competition, the model finds the normal static equilibrium price; under more realistic conditions, with nonlinearities and risk, it reaches a quantitatively different equilibrium. JEL Classification: C63, E13, P51

Journal

Economics, Management, and Financial Markets – Addleton Academic Publishers

Published: Jan 1, 2009

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