Related papers: Self-organization of value and demand
We propose a kinetic model to describe the dynamical evolution of wealth and knowledge in national and global markets, starting from a microscopic description of individual interactions. The model is built upon interaction rules that…
Understanding the evolutionary stability of cooperation is a central problem in biology, sociology, and economics. There exist only a few known mechanisms that guarantee the existence of cooperation and its robustness to cheating. Here, we…
We present a novel microscopic stock market model consisting of a large number of random agents modeling traders in a market. Each agent is characterized by a set of parameters that serve to make iterated predictions of two successive…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…
We study here numerically the behavior of an ideal gas like model of markets having only one non-consumable commodity. We investigate the behavior of the steady-state distributions of money, commodity and total wealth, as the dynamics of…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
We study the collective behavior of interacting agents in a simple model of market economics originally introduced by N{\o}rrelykke and Bak. A general theoretical framework for interacting traders on an arbitrary network is presented, with…
A self-organized model with social percolation process is proposed to describe the propagations of information for different trading ways across a social system and the automatic formation of various groups within market traders. Based on…
The condition for stationary increments, not scaling, detemines long time pair autocorrelations. An incorrect assumption of stationary increments generates spurious stylized facts, fat tails and a Hurst exponent H_s=1/2, when the increments…
We study an agent-based model of evolution of wealth distribution in a macro-economic system. The evolution is driven by multiplicative stochastic fluctuations governed by the law of proportionate growth and interactions between agents. We…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
We consider in a market model the cooperative emergence of value due to a positive feedback between perception of needs and demand. Here we consider also a negative feedback from production of the traded products, and find that this…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
We show that the quotient of Levy processes of jump-diffusion type has a fat-tailed distribution. An application is to price theory in economics. We show that fat tails arise endogenously from modeling of price change based on an excess…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…
A dynamic herding model with interactions of trading volumes is introduced. At time $t$, an agent trades with a probability, which depends on the ratio of the total trading volume at time $t-1$ to its own trading volume at its last trade.…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…