Everything about Agent Economics totally explained
In
economics, an
agent is an actor in a
model that (generally) solves an
optimization problem. In this sense, it's equivalent to the term
player, which is also used in economics, but is more common in
game theory.
For example,
buyers and
sellers are two commonly-encountered types of agents in
partial equilibrium models of a single market.
Macroeconomic models, especially
dynamic stochastic general equilibrium models that are explicitly based on
microfoundations, often distinguish
households,
firms, and
governments or
central banks as the main types of agents in the economy. Each of these agents may play multiple roles in the economy; households, for example, might act as consumers, as workers, and as voters in the model. Some macroeconomic models distinguish even more types of agents, such as workers and shoppers or commercial banks.
The term 'agent' is also commonly used in relation to
principal-agent models; in this case it refers specifically to the agent who acts on behalf of a
principal.
In
Agent-Based Computational Economics, the concept of an
agent has been more broadly interpreted to be any persistent individual, social, biological, or physical entity interacting with other such entities within the context of a dynamic multi-agent economic system.
Representative vs. heterogenous agents
An
economic model in which all agents of a given type (such as all consumers, or all firms) are assumed to be exactly identical is called a
representative agent model. A model which recognizes differences among agents is called a
heterogeneous agent model. Economists often use representative agent models when they want to describe the economy in the simplest terms possible. In contrast, they may be obliged to use heterogeneous agent models when differences among agents are directly relevant for the question at hand. For example, considering heterogeneity in age is likely to be necessary in a model used to study the economic effects of pensions; considering heterogeneity in wealth is likely to be necessary in a model used to study precautionary saving or redistributive taxation.
Further Information
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