Overview
Advanced economic simulation techniques are essential tools for understanding complex economic systems. By employing methods such as agent-based modeling, Monte Carlo simulations, and dynamic stochastic optimization, economists can analyze market behaviors and predict outcomes under uncertainty. The...
Key Terms
Example: In an agent-based model, each consumer makes purchasing decisions based on their preferences.
Example: Monte Carlo simulations can predict stock market trends by simulating thousands of possible outcomes.
Example: Dynamic stochastic optimization can help firms decide on production levels in uncertain market conditions.
Example: Game theory can explain why companies might collude to set prices.
Example: In a Nash equilibrium, two competing firms may settle on a price that maximizes their profits without undercutting each other.
Example: Simulations can be used to model economic crises and their impacts.