Economic agents differ from physical atoms because of the learning capability and memory, which lead to strategic behaviour. Economic agents learn how to interact and behave by modifying their behaviour when the economic environment changes. We show that business fluctuations are endogenously generated by the interaction of learning agents via the phenomenon of regenerative-coordination, i.e. agents choose a learning strategy which leads to a pair of output and price which feedback on learning, possibly modifying it. Mathematically, learning is modelled as a chemical reaction of different species of elements, while inferential analysis develops combinatorial master equation, a technique, which is an alternative approach in modelling heterogeneous interacting learning agents.
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The authors thank an anonymous referee for his remarks; Patrick Xihao Li, Corrado di Guilmi and participants to the EEA conference, NY May 2013, PRIN Bologna, June 2013, for suggestions; the support of the Institute for New Economic Thinking Grant INO1200022, and the EFP7, MATHEMACS and NESS, is gratefully acknowledged.
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