Abstract: A standard macroeconomic specification is that the aggregate economy
is directed by a single, smart representative agent using optimal
decision rules. This paper explores an alternative conjecture--that
the dynamic behavior of markets is often better interpreted as the
interactions of many heterogeneous, rule-of-thumb agents who are
loosely coupled in smart systems--much like the contrast of a single
serial processor with global information versus parallel processors
with limited communications. The illustration used in this paper is
the contrast between a conventional macro model of sluggish
adjustments in an aggregate producer price index and a model of
delayed industry price adjustments in a distributed production system
under costly inter-firm communications.
Keywords: Costly communications, parallel Jacobi solutions, producer pricing
Full paper (180 KB PDF)
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