Microsimulation

Microsimulation models are powerful tools for analyzing policy options (Mitton, Sutherland, and Weeks 2000; Epstein 2006; Gilbert 2007; Miller and Page 2007). For example, the Congressional Budget Office uses a microsimulation model to analyze the effects of health care reform on cost and coverage (CBO 2007). A microsimulation can be thought of as a video game without fancy graphics and jarring sounds. Instead of having “characters,” microsimulation models have “agents” that represent the entities that are affected by the policy reform. Common types of agents are people, groups of people (e.g., families), firms, insurers, health care providers, and federal/state governments. Each agent is endowed with “attributes,” or defining characteristics (e.g., age, income). An attribute is typically included if it is a dimension along which one wishes to stratify the final results or the agent’s behavior will depend on it. A behavior is a rule that determines which action the agent will undertake in response to a message received from another agent. The number of different types of agents included in the model, as well as the variety of behaviors they can act on, are strong determinants of the scope of the model. Table 1 lists some typical agents and behaviors.