An Agent-Based Extension to Sector-Wise Input-Output Recovery Models

2025-05-15

AI Summary

Traditional dynamic input-output models, constrained by fixed-price assumptions, fail to capture realistic economic responses to shocks such as natural disasters. This paper introduces the first dynamic Leontief-based model incorporating adaptive agent behavior, enabling heterogeneous producers to jointly adjust both prices and quantities—thereby relaxing the static price constraint. The model features identifiable, sector-specific behavioral parameters that quantify relative price versus quantity adjustment propensities. Integrating multi-agent modeling, dynamic input-output analysis, and equilibrium convergence algorithms, it is calibrated and subjected to counterfactual simulations using the World Input-Output Database. Empirical results reveal a pronounced quantity-adjustment bias in manufacturing and a price-adjustment bias in services. Critically, embedding this adaptive mechanism significantly improves predictive accuracy of sectoral resilience responses to shocks, establishing a novel paradigm for modeling economic shock propagation and recovery.

Technology Category

• Game Theory and Economic Paradigms: Adversarial Learning
• Cognitive Modeling & Cognitive Systems: Adaptive Behavior
• Search and Optimization: Learning to Search

Application Category

• Graph Algorithms and Modeling for the Web: Efficient manipulation of static and dynamic Web-related graphs
• Economics, Online Markets and Human Computation: Cost models of using LLMs in production systems
• Semantics and Knowledge: Methods to enhance, augment, integrate or synergize semantic models such as knowledge graphs and LLMs

Abstract

Dynamic input-output models are standard tools for understanding inter-industry dependencies and how economies respond to shocks like disasters and pandemics. However, traditional approaches often assume fixed prices, limiting their ability to capture realistic economic behavior. Here, we introduce an adaptive extension to dynamic input-output recovery models where producers respond to shocks through simultaneous price and quantity adjustments. Our framework preserves the economic constraints of the Leontief input-output model while converging towards equilibrium configurations based on sector-specific behavioral parameters. When applied to input-output data, the model allows us to compute behavioral metrics indicating whether specific sectors predominantly favor price or quantity adjustments. Using the World Input-Output Database, we identify strong, consistent regional and sector-specific behavioral patterns. These findings provide insights into how different regions employ distinct strategies to manage shocks, thereby influencing economic resilience and recovery dynamics.

Problem

• Extends input-output models to capture adaptive price and quantity adjustments
• Identifies sector-specific behavioral patterns in economic shock responses
• Analyzes regional strategies for economic resilience and recovery dynamics

Innovation

• Agent-based extension to input-output recovery models
• Simultaneous price and quantity adjustments by producers
• Sector-specific behavioral parameters for equilibrium