Bell, William Paul (2009): Network Averaging: a technique for determining a proxy for the dynamics of networks.

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Abstract
The main aim of this paper is to introduce the network averaging technique. This technique is introduced because accurately determining the structure of real networks can be difficult and the network averaging technique provides a proxy for real networks. A second aim is to introduce the adaptive interactive expectations (AIE) model, which uses a ‘pressure to change profit expectations index’ to replace the utility curve maximising agent concept. The AIE model has an interactive expectations network, which is difficult to determine, so suitable to illustrate network averaging. The AIE model is tested against the Dun and Bradstreet Profit Expectations Survey. The paper finds network averaging improves the predictive performance of AIE over its benchmarks: the rational expectations hypothesis and the adaptive expectations model. The network averaging technique could be adapted to other situations where there are endogenous effects acting through difficult to measure networks. The AIE model could be readily applied to other forms of expectations and as a replacement for the utility curve maximising agent. Finally, in this paper AIE models profit expectations, which are an important issue in their own right because they affect investment decisions and whether one business will extend credit to another business.
Item Type:  MPRA Paper 

Original Title:  Network Averaging: a technique for determining a proxy for the dynamics of networks 
Language:  English 
Keywords:  Networks; interactive; adaptive; model averaging; profit 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63  Computational Techniques ; Simulation Modeling D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D85  Network Formation and Analysis: Theory D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D84  Expectations ; Speculations B  History of Economic Thought, Methodology, and Heterodox Approaches > B5  Current Heterodox Approaches > B52  Institutional ; Evolutionary E  Macroeconomics and Monetary Economics > E1  General Aggregative Models > E17  Forecasting and Simulation: Models and Applications C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis B  History of Economic Thought, Methodology, and Heterodox Approaches > B4  Economic Methodology > B41  Economic Methodology B  History of Economic Thought, Methodology, and Heterodox Approaches > B5  Current Heterodox Approaches > B53  Austrian 
Item ID:  38026 
Depositing User:  Dr William Paul Bell 
Date Deposited:  11. Apr 2012 13:41 
Last Modified:  21. Feb 2013 20:00 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/38026 