Modeling the Capital Structure: Design

this page is for some writeup for the design of the model

Capital Model:

Two entity type:

Resource owners: ( who have resources and want to sell them )

• List of various amount of capitals occupied
• Fixed price for each capital

Entrepreneurs: ( who are interested in buying resources needed )

• List of Initial capitals
• List of capitals they already have
• List of various amount capitals they want

All capitals are measured in dollars

The program interact with the user for initial conditions of resource holders and entrepreneur ( how much capitals each entrepreneur wants or how much resources each resource holder has. )

For each round, entrepreneur will search on their neighborhood. When encountering a resource owner nearby, they will ask for the capital they want. If the owner has what they want, buy in with the price offered by the owner. Continue searching until they get all the capital needed.

Edgeworthbox Model:

The curve in edgeworthbox is a pareto optimal meaning the reallocation of resources cannot make one group better off without making others worse off, in other word, it represents the most efficient allocation of resources.

Each group only willing to trade when the marginal utility which is the change in utility by making the transaction is positive, meaning he/she can be better off by conducting the trade. The points on each person's indifference curve, representing different quantities of two goods between which a consumer is indifferent, represent equally liked combinations of quantities of the two goods for that person.