Exit and entry of consumption & capital-good firms: c-firms with too-low market share & / or negative liquid assets exit the market and are replaced by random copy of current incumbents. K-firms with no clients exit as well, and are replaced in the same fashion. Note, entry and exit take place at the beginning of the time-step so that exiting firms are recorded in the output data (produced at the end of each time-step) before they die.
Update of firms, bank and macroeconomic variables: agents update their variables (e.g. set some of them equal to 0, or update their optimal prices, the credit supply).
Capital-good firms pursue their Research and Development (R&D) activities, which involves 'Innovation' and 'Imitation'.
Each capital-good firm advertises the machine they can produce using their latest technology to consumption-good firms in the hope of securing their business. Consumption-good firms each choose a new single supplier to provide new machines over the next time-step.
Consumption-good firms plan how much to produce and invest, as well as how much to borrow: Consumption-good firms form their initial plans given their demand expectation. Initially, financial constraints are not taken into account. Then, they consider their borrowing capacity, which may lead to downward adjustments (a priori adjustments).
The bank allocates its supply of credit: The bank observes the aggregate credit demand. If it exceeds its credit supply, the economy is credit rationed. The bank then sorts firms depending on their net worth to sale ratio.
Consumption-good firms update their production and investment plans according to their resources: Once consumption firms have received their loan and know their actual resources, they update their production and investment plans. With their level of investment known, consumption-good firms send their orders to their suppliers, along with the finances to pay for production, if their investment is positive.
Both Capital and Consumption-good firms hire workers to produce their goods during the time-step: Hidden assumption in Dosi et al. (2013): the production function is of the Leontieff form. Thus, if the (aggregate) labor demand exceeds the labor supply, firms scale down their production plans.
Capital-good firms start producing. Consumption-good firms scrap the machines that they are able to replace with more efficient machines. Note that even if consumption-good firms scrap their machines before producing (see next step), this does not affect (in the code) the amount the firm can actually produce in the current period.
Consumption-good firms produce and sell their goods to the consumers: (a) Consumption-good firms undertake their production process, (b) The competitiveness of each firm is determined, (c) The consumption allocation starts, determining the demand & the sales of consumption-good firms.
All agents update their financial accounts: Firms in both sectors compute their profit, their new stock of liquid assets, and pay their debt (if any).
Statistics are computed, including the macroeconomic variables.