IDEAS home Printed from https://ideas.repec.org/a/ora/journl/v1y2017i2p166-176.html
   My bibliography  Save this article

Equilibrium Model Of Business Architecture Using Premises Of Agent-Based Modeling

Author

Listed:
  • Ioana Florina Coita

    (Universitatea din Oradea, Fac. de Științe Economice)

Abstract

Business strategy correlated with marketing and management actions are tested on the market. Their efficiency can be measured by looking at financial indicators. In order to be competitive on the market firms are striving to ensure values of financial results greater than the minimum threshold level of profitability. One way to achieve this goal is by correlating organizational structure of the business with its financial architecture. The need to find new ways of enterprise management that best fit the current economic context needs to create a link between financial structure of the business and its developmental goals. In this sense, the paper analyses the use of implementing project management as a solution to ensure company’s performance by adapting financial architecture to business strategic goals. Businesses are seen as a “fractal structure” made up of projects developed according to objectives planned. Firm’s have their own propensity to consume or to invest. Each propensity has its own specific implementation structure. Dynamic equilibrium of the firm is ensured between its investment projects and repetitive tasks that ensure continuity and survival of the business. Any risk appearing at micro level during project implementation is channeled into the business environment through agents’ constraint. According to agent-based modeling an organizational environment is made up of various agents playing different roles. Their decisions affect equilibrium of the firm, acting in according to various criteria and restrictions. Agents’ decisions are correlated to their objectives and degree of “risk tolerance”. Elements of fractal theory, game theory, econophysics, behavioral finance and agent-based modeling are powerful tools to measure and estimate the optimal business strategy to getting sound financial results. The paper develops a mathematical equilibrium model of a business that connects strategic and operational level to financial architecture taking into account the agents’ attitude to risk.

Suggested Citation

  • Ioana Florina Coita, 2017. "Equilibrium Model Of Business Architecture Using Premises Of Agent-Based Modeling," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 166-176, December.
    • Handle: RePEc:ora:journl:v:1:y:2017:i:2:p:166-176
    as

    Download full text from publisher

    File URL: http://anale.steconomiceuoradea.ro/volume/2017/n2/16.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60(2), pages 151-151.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Constantin TULAI & Ioana POPOVICI, 2010. "Modeling risk using elements of game theory and fractals," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(11), pages 79-83, May.
    5. Kahneman, Daniel, 2002. "Maps of Bounded Rationality," Nobel Prize in Economics documents 2002-4, Nobel Prize Committee.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Valerii Salov, 2015. "The Role of Time in Making Risky Decisions and the Function of Choice," Papers 1512.08792, arXiv.org.
    2. Stefan Schiller, 2017. "The Quest for Rationality: Chief Financial Officers’ and Accounting Master’s Students’ Perception of Economic Rationality," SAGE Open, , vol. 7(2), pages 21582440177, April.
    3. Laurentiu Droj & Elena - Ana Iancu (Nechita) & Ioana Florina Popovici - Coita, 2016. "Premises Of Behavioral Finance In Rational Decision-Making," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 671-681, July.
    4. Charles-Cadogan, G., 2018. "Losses loom larger than gains and reference dependent preferences in Bernoulli’s utility function," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 220-237.
    5. Lovric, M. & Kaymak, U. & Spronk, J., 2008. "A Conceptual Model of Investor Behavior," ERIM Report Series Research in Management ERS-2008-030-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    6. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Documentos de Trabajo del ICAE 2013-31, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
    7. Christian Gollier & James Hammitt & Nicolas Treich, 2013. "Risk and choice: A research saga," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 129-145, October.
    8. Hamza Bahaji, 2011. "Incentives from stock option grants: a behavioral approach," Post-Print halshs-00681607, HAL.
    9. Martin Kukuk & Stefan Winter, 2008. "An Alternative Explanation of the Favorite-Longshot Bias," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 2(2), pages 79-96, September.
    10. repec:cup:judgdm:v:12:y:2017:i:1:p:81-89 is not listed on IDEAS
    11. Lisa L. Posey & Vickie Bajtelsmit, 2017. "Insurance and Endogenous Bankruptcy Risk: When is it Rational to Choose Gambling, Insurance, and Potential Bankruptcy?," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 42(1), pages 15-40, March.
    12. Philip Bromiley, 2009. "A Prospect Theory Model of Resource Allocation," Decision Analysis, INFORMS, vol. 6(3), pages 124-138, September.
    13. Jakusch, Sven Thorsten, 2017. "On the applicability of maximum likelihood methods: From experimental to financial data," SAFE Working Paper Series 148, Leibniz Institute for Financial Research SAFE, revised 2017.
    14. Lean, Hooi Hooi & McAleer, Michael & Wong, Wing-Keung, 2015. "Preferences of risk-averse and risk-seeking investors for oil spot and futures before, during and after the Global Financial Crisis," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 204-216.
    15. LiCalzi, Marco & Sorato, Annamaria, 2006. "The Pearson system of utility functions," European Journal of Operational Research, Elsevier, vol. 172(2), pages 560-573, July.
    16. Uri Gneezy & Yoram Halevy & Brian Hall & Theo Offerman & Jeroen van de Ven, 2024. "How Real is Hypothetical? A High-Stakes Test of the Allais Paradox," Working Papers tecipa-783, University of Toronto, Department of Economics.
    17. Epper, Thomas & Fehr-Duda, Helga, 2017. "A Tale of Two Tails: On the Coexistence of Overweighting and Underweighting of Rare Extreme Events," Economics Working Paper Series 1705, University of St. Gallen, School of Economics and Political Science.
    18. Roger J. Jiao & Feng Zhou & Chih-Hsing Chu, 2017. "Decision theoretic modeling of affective and cognitive needs for product experience engineering: key issues and a conceptual framework," Journal of Intelligent Manufacturing, Springer, vol. 28(7), pages 1755-1767, October.
    19. Bowman, David & Minehart, Deborah & Rabin, Matthew, 1999. "Loss aversion in a consumption-savings model," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 155-178, February.
    20. Kuhberger, Anton, 1998. "The Influence of Framing on Risky Decisions: A Meta-analysis," Organizational Behavior and Human Decision Processes, Elsevier, vol. 75(1), pages 23-55, July.
    21. Fershtman, Chaim, 1996. "On the value of incumbency managerial reference points and loss aversion," Journal of Economic Psychology, Elsevier, vol. 17(2), pages 245-257, April.

    More about this item

    Keywords

    strategic management; risk; agent-based modeling; fractals; propensity to consume/ invest; budget constraint;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ora:journl:v:1:y:2017:i:2:p:166-176. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catalin ZMOLE (email available below). General contact details of provider: https://edirc.repec.org/data/feoraro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.