Market Emergence of Heterogeneous Consumption Price Elasticity in Time and Space in an Agent-Based Global Trade Model

Agent-based economics has emerged to complement analytical and empiricalmethods by allowing for more complex heterogeneity in models. Extending theagent-based global trade model Acclimate with five consumer groups, we studyheterogeneity of market emerging consumption price elasticity in response toeconomic shocks. While medians of emerging elasticities agree with classicalestimates, we show heterogeneity in time and qualitative differences betweenregions and income groups. We show analytically that this can be understoodvia a self-stabilizing feedback mechanism caused by the utility maximization ofconsumer agents that is introduced into the model. The emergence of observablemacroeconomic elasticities from a microeconomic decision rational providesfurther support for agent-based modeling as a complementary tool of economytheory