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Agent-Based Modeling
November 17-18, 2010
Curt Stenger
Kevin Li
12/09/2021 1
A few words before we dive in…
• About Curt:
– VP, Analytic Services
– Experience in Marketing Science and Analytics
• About Kevin:
– Product Manager, ThinkVine
– Background in new product consulting and forecasting
• Rules of engagement:
– We would like this to be more of a guided discussion and not a one-
way presentation
– Please ask questions whenever
Our thought process behind this discussion
Oops!
(Uncertain)
Do you ever see a traffic jam coming?
Ever think about why you always quote someone 4-6 hours when
you’re driving 300 miles? Uncertainty and complexity.
Your turn.
Others?
Why do birds How do you
fly in a V? win a war?
Why do ants
Why is your build their
brain shaped a colonies this
certain way? way?
Introducing the complexity sciences
• Has been in the lexicon of social and physical science since Von
Neumann’s “machine.”
• Key examples include:
– Biology
• John von Neumann: self-reproducing automata (‘50s)
• John Conway: game of Life (‘60s)
• Chris Langton: artificial life (late ‘80s)
– Social science
• Simon, March and Cyert: the ‘behavioral school’ and simulation of few agent
systems (‘50s and ‘60s)
• Tom Schelling: tipping model of segregation (late ‘60s)
– Computer science
• artificial intelligence (AI)
• robotics
• distributed AI (DAI)
• multi-agent systems (MAS)
• object-oriented programming (OOP)
Ethnology of Simulation Modeling
t
Why the need for dynamic models?
t
Why the need for dynamic models?
today
But reality is not so simple…
Different things can happen!
We care about which path will happen and
how it’ll get there.
Possible futures
today
t
Same example using ABM
ABM
today
t
Same example using ABM
today
t
Same example using ABM
today
t
Same example using ABM
today
t
Same example using ABM
We care about the underlying assumptions. If we
understand the bottom-up behavior, we can generate the
aggregate output.
today
t
Applying ABMs to the consumer marketplace
25
Today’s general framework
Experience need!
Evaluate in-store
Talk about it! options
Use inventory
Agent’s age positively correlated Agent’s years education positively If Agent income is in top X% of population
with years education and income correlated with income then probability to buy luxury watch +Y%
How do we do it?
Each agent is different from another, but aggregate averages still hold true
for population (heterogeneity).
How do we do it?
Simulated Interactions
Consumers Marketing
How do we do it?
1 Train the Tool = CALIBRATE
We recreate the past 2 years of sales from the “bottom up” by building rules that
explain why those sales outcomes occurred.
2 Prove the Tool = VALIDATE
Once trained, we compare the most recent 6-months of actual sales (data not used to
3 Usethe
train themodel)
Tool = SIMULATE
to a simulation of the most recent 6-months of sales.
Once the model has been calibrated & validated, we can begin to project forward and
provide clients with the ability to run “what if” planning scenarios.
Train Prove Use
The model is trained by using your demographic, marketing & sales data. Track against hold out data Forecast
2 Years Sales History 1-2 Quarters Future
Simulated
Actual
Model Fit
With a weekly MAPE of 4.6%, we have strong evidence that the ACME Brand model fits
historical sales data very well.
Actual
Simulated
Our goal is to achieve
a weekly MAPE (Mean
Absolute Percentage
of Error), of 15% or
less.
Marketing Impacts FY10
•FY10 sees an investment of $10.8MM in TV with a modest $.29 ROI
•Trade has highest level of ROI
•Print, ASM, and PR have high variability due to low spends
7085 69.2%
35
ThinkAhead: Graphical Representation
We model the “path to purchase” for your product, from the
marketing levers you pull all the way to consumer purchase.
Benefits