In mainstream microeconomic theory firms are assumed to maximize profits. This useful assumption enables economists to derive demand and supply functions and estimate them with market data. The rarely asked question is: how do businessmen optimize and how closely do their efforts achieve optimum...

This paper presents tractable and efficient numerical solutions to general equilibrium models of asset prices and consumption when the representative agent has recursive preferences. It provides a discrete-time presentation of the approach of Fisher and Gilles (1998), treating continuous-time...

This paper applies evolutionary modeling to expectation formation of an asset's price. As a first step, I consider a population of n investors each of whom takes on one of two possible cultural variants. Every individual is a potential role model for all other individuals and can pass on their...

Various studies of asset markets have shown that traders are capable of learning. In this paper we replace human traders with artificial-intelligent software agents in a simulated stock market. They make predictions about the future, randomly submit their quotes, and transact at certain price. A...

Generalizing the Fisher equation for the term structure of interest rates, we analyse the influence of the premium risk on the long-run interest rate. The existence of the risk premium causes an inequality between the forward interest rates and the expected interest rates. We give an alternative...

In the past few years, we have witnessed a tremendous proliferation of transactions using the Internet as a virtual marketplace. U.S. News and World Report estimates the value of electronic commerce around $13 billion in 1998. In addition to transactions where prices are posted, sellers also use...

The possibility that low dimensional chaotic systems generate stochastic dynamics is now a standard idea in economics. As a consequence, modern time series analysis has among its primary goals the design and computer implementation of techniques for distinguishing complex deterministic dynamics...

This paper extends the N -person IPD game into a more interesting one in economics: the oligopoly game. Due to its dynamics of market share, the oligopoly game is more complicated and need not be exactly an N -person IPD game. Using genetic algorithms, we simulate oligopoly games under various...

Following the concept of "adaptively rational equilibrium", Brock and Hommes establish a simple present discounted value asset-pricing model with heterogeneous beliefs. Agents adapt their beliefs over time by choosing from different predictors or expectations functions, based upon their past...

It is common in applied econometrics to test a highly persistent process under the null hypothesis against an alternative of a unit root process. We show that the conventional asymptotic critical values for the stationarity tests of Kwiatkowski et al. and Leybourne and McCabe may have...