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Analyzing the Dynamics of Relative Prices on a Market with Speculative and Non-Speculative Agents Based on the Evolutionary Model

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  • Dospinescu, Andrei Silviu

    ()
    (CEIS, CMM, NIER, Romanian Academy)

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    Abstract

    The paper deals with an evolutionary model focused on the relation between the behavior of prices and the structure of the population of economic agents. The model allows for identification of the short-term behavior of prices and the dynamics of the population of economic agents in the context of seven scenarios. These scenarios are a combination of four key factors: market regulations, the maturity of the market; the intervention of the state on the market supply side and the modifications of the incentives to speculate and not-speculate. The main findings of the simulation of the scenarios are: i) The presence of speculators leave long lasting effects which do not die out with the decrease in the number of speculators; ii) In the presence of high speculations the intervention of the state can act as an anchor to the market helping to lower the prices; iii) The market forces have a more lasting effect than the state regulation mechanisms.

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    Bibliographic Info

    Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

    Volume (Year): (2011)
    Issue (Month): 1 (March)
    Pages: 72-87

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    Handle: RePEc:rjr:romjef:v::y:2011:i:1:p:72-87

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    Related research

    Keywords: relative prices; speculative and non-speculative agents; evolutionary model;

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    1. Sidney G. Winter & Yuri M. Kaniovski & Giovanni Dosi, 2003. "A Baseline Model of Industry Evolution," LEM Papers Series 2003/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Dennis R. Capozza & Paul J. Seguin, 1995. "Expectations, Efficiency, and Euphoria in the Housing Market," NBER Working Papers 5179, National Bureau of Economic Research, Inc.
    3. Jonard, N. & Yfldizoglu, M., 1998. "Technological diversity in an evolutionary industry model with localized learning and network externalities," Structural Change and Economic Dynamics, Elsevier, vol. 9(1), pages 35-53, March.
    4. Carpenter, Jeffrey P, 2002. "Evolutionary Models of Bargaining: Comparing Agent-Based Computational and Analytical Approaches to Understanding Convention Evolution," Computational Economics, Society for Computational Economics, vol. 19(1), pages 25-49, February.
    5. Malpezzi, Stephen, 1999. "A Simple Error Correction Model of House Prices," Journal of Housing Economics, Elsevier, vol. 8(1), pages 27-62, March.
    6. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
    7. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
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