The Relationship Between Agent-based Simulation and Game Theory in the Case of Parallel Trade

Abstract

Pharmaceutical parallel trade emerged due to the European Union's single market for medicines. While many players, such as manufacturers, wholesalers, parallel traders, pharmacies, regulatory authorities, and hospitals, are involved in this market, having a model that accurately reflects the parallel trade market could be a considerable advantage for players in this market. One way to model the parallel trade market is by employing game theory, which is frequently used to model and explain business interactions. However, game theory imposes limitations on models. Agent-based modeling is a promising framework for studying the parallel trade market, which allows us to investigate macroscopic outcomes that emerge from microscopic rules, decisions, and interactions. Moreover, agent-based modeling allows for high expressiveness and complexity in agents, improving agents' efficiency in autonomy and reactivity compared to current game theoretic models. In this paper, we develop the concept of an agent-based model for the pharmaceutical parallel trading market based on an available game-theoretic model of the market.