Universal Coordination Instrument of Economic Individuals

Parinov, Sergey (2022): Universal Coordination Instrument of Economic Individuals.

Abstract

This study explores the micro-level of making economic decisions, focusing on processes and causal relationships using which individuals (agents) take into account each other’s activities. A central concept employed herein is the Shared Mental Model (SMM) used by participants of joint activity to collect and process information dispersed between them that is essential for their decision-making. The abilities of agents to develop SMMs is examined through three primary modes of communication – direct, indirect, and previous. Based upon these insights, the Universal Coordination Instrument (UCI) was proposed, inherent in all economic individuals. Agents utilize their UCIs via a combined individual-collective approach to accommodate each other’s activities. The UCI structure is defined as a specialized agent-based simulation model, which is an environment for agents for their information interactions and consists of “interface” and “computational” blocks. These blocks are configured for each type of joint activity of agents in solving by agents some optimization problem. The results obtained are an extension of microeconomic theory, describing how agents can redefine all conditions for maximizing their objective functions, including the content of the function itself, to best take into account each other's intentions and capabilities, as well as in response to critical disturbances. The key findings of this study are that individuals engage in two types of rational behavior that lead to two types of equilibrium in the economic system. This allows the system to operate efficiently under substantive disequilibrium. In a face of unavoidable disturbances, a rational economic order consists of restoring equilibrium in economic systems as efficiently as possible in response to disturbances. As a potential outcome, the UCI can be implemented as a computer system to facilitate the efficient re-coordination of economic activities and restore equilibrium.

• Item Type: MPRA Paper
• Language: English
• Keywords: microeconomic theory; economic system; instability of preferences; procedural rationality; coordination equilibrium
• Subjects: D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles; D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D47 - Market Design; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development

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