Evolution of MoneyThrough Multi-Agent Model

Abhishek Malik (Y6020)Abhishek Gupta (Y6019)

Project Guide:Prof. Amitabha Mukerjee

Introduction

• Our objective:Proto-money from barter– Agent-Based Simulation for Emergence of Money

from Barter

Related Works: Kiyotaki and Wright

• Kiyotaki and Wright did game theoretic analysis of emergence of money through nash-equilibria search. (1989)

• “On Money as a Medium of Exchange”The Game Theoretic Approach

Money as a Medium of ExchangeThe Game Theoretic Approach

• It’s a simple general equilibrium matching model, in which the objects that become media of exchange will be determined endogenously as part of the non- cooperative equilibrium.

• The driving force behind the use of money is specialization, which implies that agents do not necessarily consume what they produce. (Adam Smith, 1776)

Money as a Medium of ExchangeThe Game Theoretic Approach

• We look for strategies that maximize individuals' expected utility, given the strategies of others and the distribution of inventories. Nash equilibrium in trading strategies is characterized.

• The Economy has three indivisible commodities 1, 2, and 3; equal proportions of three types of agents 1,2, and 3.

• Type I agents derive utility from the consumption of good i and only produce good i* /= i

Money as a Medium of ExchangeThe Game Theoretic Approach

• Expected Utility = (Utility derived from consuming i) – (disutility of producing i*) – (disutility of storing a good j)

• The agents trade among with some pre-defined constraints.

• Equilibrium is attained and there may be more than one commodities of exchange.

Related Works: Duffy

• Duffy and Ochs did a human subject based study based on Kiyotaki-Wright model in 1999.

• Duffy later performedagent-based modelexperiments with moreencouraging results. (2001)

Related Works: Duffy

• In the 2001 Agent-based model study titled “Learning to speculate: Experiments with artificial and real agents”

• The two modifications to the Kiyotaki-Wright model were:1. an unequal distribution of players across types2. automating the decisions of all player types who

are not called upon to play speculative strategies in equilibrium.

Related Works: Kobayashi et.al.

• M. Kobayashi et.al. use Doubly Structural Network Model (DSN model) (2009)

• DSN:– Inner-agent model of beliefs/knowledge– Inter-agent model of social-network

• It explain concept of money as exchangeable medium.

Related Works: Kobayashi et.al.

Related Works: Kobayashi et.al.

1. Exchange: neighboring agents i & j with probability PE if both recognize exchangeability between goods.

2. Learning:i. Imitation (PI)

ii. Trimming (PT)

iii. Conceiving (PC)

iv. Forgetting (PF)

Additions to Kobayashi Model

• Additions:1. Production function

a. P = f (health)

2. Consumption (demand distribution)3. Health = f (consumption fulfillment)4. Trade by utility from commodities

a. Utility = (Demand/ Supply)b. Arranged in order for commodities and traded

accordingly

References

[1] Duffy, J., “Learning to speculate: Experiments with artificial and real agents”, Journal of Economic Dynamics & Control 25, pages 295-319. (2001)

[2] Kiyotaki, N., Wright, R., “On money as a medium of exchange”, Journal of Political Economy 97, pages 927-954. (1989)

[3] Kobayashi, M. et. al., “Simulation Modeling of Emergence-of-Money Phenomenon by Doubly Structural Network”, New Advances in Intelligent Decision Technologies, pages 585-594. (2009)

Thank You!