Related papers: An Equilibrium Model with Computationally Constrai…
In this article, we consider the problem of equilibrium price formation in an incomplete securities market consisting of one major financial firm and a large number of minor firms. They carry out continuous trading via the securities…
We study the competitive equilibrium of large random economies with linear activities using methods of statistical mechanics. We focus on economies with $C$ commodities, $N$ firms, each running a randomly drawn linear technology, and one…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
The thesis of this essay is that, in heterogeneous agent macroeconomics, the assumption of rational expectations about equilibrium prices is unrealistic and should be replaced. Rational expectations imply that decision makers forecast…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
Firms that price perishable resources -- airline seats, hotel rooms, seasonal inventory -- now routinely use demand predictions, but these predictions vary widely in quality. Under hard capacity constraints, acting on an inaccurate…
We study an equilibrium-based continuous asset pricing problem for the securities market. In the previous work [16], we have shown that a certain price process, which is given by the solution to a forward backward stochastic differential…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
We prove the existence of a competitive equilibrium in a production economy with infinitely many commodities and a measure space of agents whose preferences are price dependent. We employ a saturated measure space for the set of agents and…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
Electricity market operators worldwide use mixed-integer linear programming to solve the allocation problem in wholesale electricity markets. Prices are typically determined based on the duals of relaxed versions of this optimization…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
With recent development of artificial intelligence, it is more common to adopt AI agents in economic activities. This paper explores the economic actions of agents, including human agents and AI agents, in an economic game of trading…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and…
When calibrating spatial partial equilibrium models with conjectural variations, some modelers fit the suppliers' sales to the available data in addition to total consumption and price levels. While this certainly enhances the quality of…