An agent-based information management approach to smoothen the pork cycle in China

Abstract

The objective of our research is to study the relationship between (a) the spread of information at farmer level and (b) the emerging behaviour at sector level, applied to the case of the pork cycle in China, using an agent-based model. For this paper, we investigate the effect of farmers' individual supply decisions on the overall supply pattern in the sector. We apply a basic agent-based supply- and demand model populated with pig farmers, where supply is based on price expectations that include a time lag. The farmers decide upon their future supply (at farm level) using the price expectations they are able to make based on the information at their disposal. We compare our agent-based model with the classical cobweb model, which exhibits periodical over- and under-supply. This periodicity is not desirable, as is illustrated by a realistic example from the pork sector in China. The Chinese government tries to smoothen the overall supply and demand pattern by acting as a speculator as soon as price imbalance at total system level exceeds a threshold value, hence intervening at system level. Our agent-based model displays similar behaviour, and we can conclude that smoothening the supply curve by diminishing periodicity is also possible at individual level. An emergent result from the comparison is that mapping of economic supply and demand functions to individual agents' decisions is not straightforward. Our model is a fruitful basis for further research, which will include social interaction, imitation behaviour and a more sophisticated information diffusion process that reflects the rate at which a farmers population adopts information. © Springer-Verlag Berlin Heidelberg 2011.