Economic Reasoning from Simulation-Based Game Models

Abstract

Simulation modeling in economics has historically been viewed as an alternative to mainstream analytic technique, and as such has generally and intentionally avoided the focus on rational behavior and equilibrium reasoning that is characteristic of game-theoretic approaches. The emerging methodology of empirical game-theoretic analysis (EGTA) attempts to bridge agent-based simulation and game theory, combining the flexibility of simulation with the discipline of rationality criteria. The basic idea is to estimate a restricted game model from data generated by systematic simulation over a space of heuristic strategy profiles. EGTA enables a standard form of strategic analysis for complex economic scenarios previously addressed only in severely stylized form.