Related papers: A partial stochastic equilibrium model and its lim…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
These notes discuss several topics in neoclassical economics and alternatives, with an aim of reviewing fundamental issues in modeling economic markets. I start with a brief, non-rigorous summary of the basic Arrow-Debreu model of general…
The influence of a fixed number of agents with the same fixed behavior on the dynamics of the minority game is studied. Alternatively, the system studied can be considered the minority game with a change in the comfort threshold away from…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
We explore a mechanism of decision-making in Mean Field Games with myopic players. At each instant, agents set a strategy which optimizes their expected future cost by assuming their environment as immutable. As the system evolves, the…
This paper proposes a spatial model with a realistic geography where a continuous distribution of agents (e.g., farmers) engages in economic interactions with one location from a finite set (e.g., cities). The spatial structure of the…
We consider an economy made of competing firms which are heterogeneous in their capital and use several inputs for producing goods. Their consumption policy is fixed rationally by maximizing a utility and their capital cannot fall below a…
In a satisficing equilibrium each agent $i$ plays one of her top $k_i$ actions in response to the actions of the other agents. Our concept unifies models of bounded rationality and yields predictions that differ from canonical solution…
We study the power and limitations of posted prices in multi-unit markets, where agents arrive sequentially in an arbitrary order. We prove upper and lower bounds on the largest fraction of the optimal social welfare that can be guaranteed…
We present examples of agent-based and stochastic models of competition and business processes in economics and finance. We start from as simple as possible models, which have microscopic, agent-based, versions and macroscopic treatment in…
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 formulate a continuous-time competitive equilibrium model of irreversible capacity investment in which a continuum of heterogeneous producers supplies a single non-durable good subject to exogenous stochastic demand. Each producer…
Financial firms and institutional investors are routinely evaluated based on their performance relative to their peers. These relative performance concerns significantly influence risk-taking behavior and market dynamics. While 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 a market mechanism that sets edge prices to incentivize strategic agents to efficiently share limited network capacity. In this market, agents form coalitions, with each coalition sharing a unit capacity of a selected route and…
In this paper we study stochastic dynamic games with many players; these are a fundamental model for a wide range of economic applications. The standard solution concept for such games is Markov perfect equilibrium (MPE), but it is well…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
Why is ``worthless'' fiat money generally accepted as payment for goods and services? In equilibrium theory, the value of money is generally not determined: the number of equations is one less than the number of unknowns, so only relative…
We study price formation in intraday electricity markets in the presence of intermittent renewable generation. We consider the setting where a major producer may interact strategically with a large number of small producers. Using…