Agent-Based Computational Economics (ACE)
Research Area: Organization of Firms and Markets

Last Updated: 30 July 2007

Site Maintained By: Leigh Tesfatsion Department of Economics Iowa State University Ames, Iowa 50011-1070 http://www.econ.iastate.edu/tesfatsi/ tesfatsi AT iastate.edu Online ACE Course (Self-Study eBook) ACE Website

Table of Contents: Basic Issues Readings Software, Toolkits, and Demos Resource Sites, Groups, and Individual Researchers

Basic Issues

• Organizations as computational entities;
• Decision making, learning, and adaptation within organizations;
• Explanation of macro-level organizational performance on the basis of micro-level agent actions and interactions;
• Optimal design of organizations;
• Evolution of organizational structure.

Readings

• Howard E. Aldrich, Organizations Evolving, Sage Publications, October 1999.
  From the publisher: "Howard E. Aldrich charts the development of organizational forms and assesses the impact on these of external innovations such as changing technology and globalization. New theories of knowledge and entrepreneurship are woven into the analysis, together with fresh interpretations of data." Howard E. Aldrich is Professor of Sociology at the University of North Carolina.

  Kenneth J. Arrow, The Limits of Organization, Norton, New York, 1974.

  Jason Barr and Francesco Saraceno, "A Computational Theory of the Firm," Journal of Economic Behavior and Organization 49 (2002), 345-361.

  Kathleen M. Carley, "A Comparison of Artificial and Human Organizations," Journal of Economic Behavior and Organization 31 (1996), 175-191.

  Abstract: This paper presents results from an artificial organization project and demonstrates how contrasting models with each other and with empirical data can facilitate the development of more veridical organizational models. Specifically, this paper examines whether certain organizational models, differing only with respect to the cognitive limitations and adaptability or general intelligence of the agents, are better or worse predictors of the behavior of similar organizations composed of humans.

  A. D. Chandler, "What is a Firm? A Historical Perspective," European Economic Review 36 (1992), 483-494.

  Myong-Hun Chang and Joseph E. Harrington, Jr., "Agent-Based Models of Organizations", pp. 1272-1337 in Leigh Tesfatsion and Kenneth L. Judd (editors), Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics, Handbooks in Economics Series, North-Holland, Amsterdam, the Netherlands, 2006.

  Abstract: The agent-based approach views an organization as a collection of agents, interacting with one another in their pursuit of assigned tasks. The performance of an organization in this framework is determined by the formal and informal structures of interactions among agents, which define the lines of communication, allocation of information processing tasks, distribution of decision-making authorities, and the provision of incentives. This chapter provides a synthesis of various agent-based models of organizations and surveys some of the new insights that are being delivered. The ultimate goal is to introduce the agent-based approach to economists in a methodological manner and provide a broader and less idiosyncratic perspective to those who are already engaging in this line of work. The chapter is organized around the set of research questions that are common to this literature: 1) What are the determinants of organizational behavior and performance? 2) How does organizational structure influence performance? 3) How do the skills and traits of agents matter and how do they interact with structure? 4) How do the characteristics of the environment -- including its stability, complexity, and competitiveness -- influence the appropriate allocation of authority and information? 5) How is the behavior and performance influenced when an organization is coevolving with other organizations from which it can learn? 6) Can an organization evolve its way to a better structure?

  Stephen Decanio, Catherine Dibble, and Keyvan Amir-Atefi, "The Importance of Organizational Structure for the Adoption of Innovations," Management Science 46(10) (2000), 1285-1299.

  Giovanni Dosi and F. Malerba (eds.), Organization and Strategy in the Evolution of Enterprise, MacMillan Press, London, 1996.

  Guido Fioretti, "Agent-Based Models of Industrial Clusters and Districts" (pdf preprint,22pp), to appear in Contemporary Issues in Urban and Regional Economics, edited by Frank Columbus, Nova Science Publishers.

  Abstract: "Agent-based models, an instance of a wider class of connectionist models, allow bottom-up simulations of organizations constituted by a large number of interacting parts. Thus, geographical clusters of competing or complementary firms constitute an obvious field of application. This contribution explains what agent-based models are, reviews applications in the field of industrial clusters, and focuses on a simulator of infra- and inter-firm communication."

  Nicolai J. Foss, "The Rhetorical Dimensions of Bounded Rationality: Herbert A. Simon and Organizational Economics" (pdf), Working Paper No. 2002-07, Department of Industrial Economics and Strategy, Copenhagen Business School, Denmark, April 2002.

  D. R. Ilgen and C. L. Hulin (eds.), Computational Modeling of Behavior in Organizations: The Third Scientific Discipline, American Psychological Association, Washington, DC, 2002.

  A. Lomi and E. R. Larsen (eds.), Dynamics of Organizations: Computational Modeling and Organizational Theories, AAAI Press, New York, 2001.

  Thomas A. Marschak and Roy Radner, Economic Theory of Teams, Yale University Press, New Haven, 1972.

  John A. Mathews, "Strategizing vs. Economizing: Theorizing Dynamic Competitive Behavior in Disequilibrium," Working Paper 17-11-02, Aarhus School of Business, Denmark, November 2002.

  Abstract: "This paper is addressed to the fundamentals of what is meant by the competitive behavior of firms. The problem is that much of the interesting work in strategy that documents behavior by firms at the frontiers of biotechnology, ICTs, and other knowledge-intensive sectors, both individually and in networks and clusters, seems to escape the frameworks of traditional strategizing discourse. An approach is proposed, and explored, which involves formulating all strategizing behavior as taking place in disequilibrium, where positive entrepreneurial profits can be earned, and contrasting this with economizing behavior, seen as revolving around perfectly competitive equilibrium (PCE), where by definition all entrepreneurial profits are zero. ... The paper closes by contrasting this approach, which is Schumpeterian (Joseph Schumpeter), Knightian (Frank Knight), and Penrosian (Edith Penrose) in inspiration, with the language of strategizing based on equilibrium notions."

  Bart Nooteboom, Learning and Innovation in Organizations and Economies, Oxford University Press, 2000, 343 pages, ISBN: 0-199-124099-X.

  From the Author: "This book seeks to develop a heuristic of discovery. How does novelty arise, and how can it arise in such a way that exploitation and exploration can be combined? An attempt is also made to connect the levels of individual learning, organizational learning, and innovation in industries or `innovation systems.' Building blocks for this endeavor are sought in economics, sociology, and cognitive science."

  Barte Nooteboom is with the Rotterdam School of Management at the Erasmus University Rotterdam.

  Elinor Ostrom, "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives 14 (2000), 137-158.

  Michael J. Prietula, Kathleen M. Carley, and Les Gasser, Simulating Organizations: Computational Models of Institutions and Groups, The MIT Press, Cambridge, MA, 1998.

  S. T. Seitz, C. L. Hulin, and K. A. Hanish, Simulating Withdrawal Behaviors in Work Organizations: An Example of a Virtual Society, Nonlinear Dynamics, Psychology, and Life Sciences 4 (2000), 33-65.

  Herbert Simon, The Sciences of the Artificial, Second Edition, The MIT Press, Cambridge, MA, 1982.

  Timothy Van Zandt, "Organizations with an Endogenous Number of Information Processing Agents," pp. 239-305 in M. Majumdar (ed.), Organizations with Incomplete Information, Cambridge University Press, Cambridge, UK, 1998.

  Oliver E. Williamson and Sidney G. Winter (eds.), The Nature of the Firm: Origins, Evolution, and Development, Oxford University Press, New York, 1993.

Software, Toolkits, and Demos

• Annotated list of pointers to ACE/CAS General Software and Toolkits

• Annotated list of pointers to ACE/CAS Computational Laboratories and Demonstration Software

Resource Sites, Groups, and Individual Researchers

• ACE/CAS Research Sites and Groups

• Individual Researchers using ACE-Related Tools

• Esben S. Andersen, (Business Studies, Aalborg University, Denmark): Economic organization (knowledge creation, specialisation, and networks); Evolutionary modelling and simulation; History of economic analysis, with a focus on Schumpeterian economics.

• Kathleen Carley (Institute for Software Research International, Carnegie Mellon University, Pittsburg, PA): Computational organizational theory; Social organizational knowledge and information networks; How social networks, knowledge networks, and informational networks interact to influence the emergence of groups.

• Myong-Hun Chang (Department of Economics, Cleveland State University, Ohio): Industrial organization; Computational organization theory; Multi-agent adaptive systems; Applied game theory.

• Les Gasser (Library and Information Science, University of Illinois at Urbana-Champaign): Technical and social aspects of organization-scale information processing; Intelligent multi-agent systems; Enterprise integration for continuously-learning agile firms.

• Joe Harrington (Department of Economics, Johns Hopkins University, Baltimore): Industrial organization; Political economy; Evolutionary economics; Game theory.

• Tomas Klos (Center for Mathematics and Computer Science - CWI, Amsterdam, the Netherlands): Computational economic organization; Governance and matching; Firms and markets; Repeated prisoner's dilemma.

• J. Peter Murmann (Graduate School of Management, Northwestern University, Evanston): Evolutionary theory in management and organization theory; Evolutionary theories in the social sciences.

• Bart Nooteboom (Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands): Organizational dynamics; Agent-based transaction cost economics; New institutional economics.

• Elinor Ostrom (Professor of Political Science, Workshop in Political Theory and Policy Analysis, Indiana University, Bloomington, IN): Common pool resource usage; Collective decision-making.

• John Padgett (Department of Political Science, University of Chicago, Illinois, U.S.A.): Emergent organization; Rise of the Medici, 1400-1434; Plea bargaining; Federal budget process.

• Michael J. Prietula (Department of Information and Decision Sciences, Warrington College of Business, University of Florida, Gainesville): Computational organizational theory; Information systems; Cognitive science/human expertise.

• Peer-Olaf Siebers (School of Computer Science, ASAP Group, University of Nottingham, UK): Application of agent-based modeling and simulation to study human-centric complex adaptive systems.

Copyright © 2007 Leigh Tesfatsion. All Rights Reserved.