Agent-based modeling and simulation for economic markets: a comprehensive review of applications, challenges, and opportunities

Economic and financial markets are characterized by interactions among various entities, whose individual behaviors and decisions collectively lead to emergent phenomena that may be unapparent and unexpected. A well-known approach for developing detailed models that closely represent such dynamic and complex systems is Agent-based Modeling and Simulation (ABMS). This comprehensive review analyzes the state-of-the-art application of ABMS for economic and financial market analysis, examining over 120 studies to provide a clear understanding of its current state and future potential. The review demonstrates how simulating market behavior with agent-based models can enhance understanding of market dynamics and serve as a robust decision-support system for running “what-if” scenarios and exploring their outcomes in a virtual environment. Furthermore, it critically assesses methodological challenges and highlights future opportunities for employing ABMS to analyze economic and financial markets.