Related papers: Modelling an Imperfect Market
In general it is not clear which kind of information is supposed to be used for calculating the fair value of a contingent claim. Even if the information is specified, it is not guaranteed that the fair value is uniquely determined by the…
This paper studies the trading volumes and wealth distribution of a novel agent-based model of an artificial financial market. In this model, heterogeneous agents, behaving according to the Von Neumann and Morgenstern utility theory, may…
In this paper, we describe a novel agent-based approach for modelling the transaction cost of buying or selling an asset in financial markets, e.g., to liquidate a large position as a result of a margin call to meet financial obligations.…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…
We present a simple model of a non-equilibrium self-organizing market where asset prices are partially driven by investment decisions of a bounded-rational agent. The agent acts in a stochastic market environment driven by various exogenous…
A seller is selling a pair of divisible complementary goods to an agent. The agent consumes the goods only in a specific ratio and freely disposes of excess in either goods. The value of the bundle and the ratio are private information of…
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,…
Prediction markets are often used as mechanisms to aggregate information about a future event, for example, whether a candidate will win an election. The event is typically assumed to be exogenous. In reality, participants may influence the…
How do individuals accumulate wealth as they interact economically? We outline the consequences of a simple microscopic model in which repeated pairwise exchanges of assets between individuals build the wealth distribution of a population.…
We consider a model of a data broker selling information to a single agent to maximize his revenue. The agent has a private valuation of the additional information, and upon receiving the signal from the data broker, the agent can conduct…
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of…
All-pay auctions, a common mechanism for various human and agent interactions, suffers, like many other mechanisms, from the possibility of players' failure to participate in the auction. We model such failures, and fully characterize…
We introduce and study a model of an interacting population of agents who collaborate in groups which compete for limited resources. Groups are formed by random matching agents and their worth is determined by the sum of the efforts…
In this paper, we propose a mean-field game model for the price formation of a commodity whose production is subjected to random fluctuations. The model generalizes existing deterministic price formation models. Agents seek to minimize…
In various markets where sellers compete in price, price oscillations are observed rather than convergence to equilibrium. Such fluctuations have been empirically observed in the retail market for gasoline, in airline pricing and in the…
Real world markets display power-law features in variables such as price fluctuations in stocks. To further understand market behavior, we have conducted a series of market experiments on our web-based prediction market platform which…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
We study the bilateral trade problem: one seller, one buyer and a single, indivisible item for sale. It is well known that there is no fully-efficient and incentive compatible mechanism for this problem that maintains a balanced budget. We…