Publication detail

Firms formation and growth in the model with heterogeneous agents and monitoring

Author(s): PhDr. Petr Švarc , Marko, Peter
Type: Articles in refereed journals
Year: 2008
Number: 15
Published in: Bulletin of the Czech Econometric Society
Publishing place: Prague
Keywords: monitoring, firm size, power law, agent-based model, simulation, heterogeneous agents
JEL codes: L11, C15, C16
Suggested Citation:
Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: In this article we extend the agent-based model of firms' formation and
growth proposed in [4]. In [4] the firms creation, expansion or contraction results from the interaction of heterogeneous utility maximizers. While the original model was able to replicate the power law distribution in the firms' sizes agents in the model set their
utility maximizing effort levels completely freely and undetected. This led to the
emergence of free riding and infuenced the overall dynamics of the model. Therefore we
decided to extend the original model by introducing the monitoring which is seen in the economic literature, besides for example the proper incentive scheme ([18]), as a possible way how to make employees work harder.
Our motivation is to compare the extended
model with both to the original case without monitoring and empirical data about ¯rms
sizes distribution.


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