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IESE Research Papers,
IESE Business School

No D/886: A simulation approach to a world with learning

Rafael Andreu (), Josep Riverola, Josep M. Rosanas and Rafael de Santiago
Additional contact information
Rafael Andreu: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Josep Riverola: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Josep M. Rosanas: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Rafael de Santiago: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

Abstract: The main objective of the firm in economics-based models is to maximize profit. Dropping this objective in order to make the models more realistic complicates the analysis and is seldom done, thus leaving management action out of the picture. In this paper we try to understand how management decisions give rise to aggregate results. In particular, we develop a simulation model of an economy in which emphasis is placed on managers' decision-making criteria. The key decision managers have to make is which projects their firms will undertake. Project selection has an impact on the firm, as the firm's profile may change through learning.

Keywords: Management; Economics; Learning; Simulation

23 pages, October 13, 2010

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