Related papers: The thermodynamic approach to market
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including electric power markets and the power systems they intend to govern. Market-based control is founded on the conjecture that…
The report attempts of apply econophysics concepts to the Eurozone crisis. It starts by examining the idea of conservation laws as applied to market economies. It formulates a measure of financial entropy and gives numerical simulations…
In this chapter the complex systems are discussed in the context of economic and business policy and decision making. It will be showed and motivated that social systems are typically chaotic, non-linear and/or non-equilibrium and therefore…
In his Comment [1], Philip Strasberg (PS) argues from the analysis of different examples that the framework we have presented in [2] does not recover known results of macroscopic textbook thermodynamics. Here, we show that such apparent…
Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
The following measures against unemployment are proposed: In the short term, to promote greater income for the poorest sectors. It is shown that this can be paid with the resulting increased production, without losing income to the other…
The monograph is concerned with some key problems of the theory of nonlinear economic dynamics. The authors' concept consists in analyzing the problem of structural instability of economic systems within the framework of the synergetic…
Originally formulated for macroscopic machines, the laws of thermodynamics were recently shown to hold for quantum systems coupled to ideal sources of work (external classical fields) and heat (systems at equilibrium). Ongoing efforts have…
Several problems arising in Economics and Finance are analyzed using concepts and quantitative methods from Physics. Here is the abridged abstact: Chapter 1: By analogy with energy, the equilibrium probability distribution of money must…
As energy markets begin clearing at sub-hourly rates, their interaction with load control systems becomes a potentially important consideration. A simple model for the control of thermal systems using market-based power distribution…
We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance,…
In this paper, we test predictions of a new theory of macroeconomics, called "thermal macroeconomics." The theory aims to apply the mathematical structure of classical thermodynamics, including analogues of temperature and entropy, to…
Concepts of everyday use like energy, heat, and temperature have acquired a precise meaning after the development of thermodynamics. Thermodynamics provides the basis for understanding how heat and work are related and with the general…
This paper debates the contribution of Econophysics to the economic or financial domains. Since the traditional approach performed by Economics or Finance has revealed to be insufficient in fully characterizing and explaining the…
Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…
Many economic theories have been introduced over the course of history to articulate our understanding of the economy. Classical theories by Adam Smith and David Ricardo's Comparative Advantage have been foundational for the last century's…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
This article is a prologue to the article "Why Markets are Inefficient: A Gambling 'Theory' of Financial Markets for Practitioners and Theorists." It presents important background for that article --- why gambling is important, even…