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Need, greed and noise: competing strategies in a trading model

Author

Listed:
  • Donangelo, R.
  • Hansen, A.
  • Sneppen, K.
  • Souza, S.R.

Abstract

We study an economic model where agents trade a variety of products by using one of the three competing rules: “need”, “greed” and “noise”. We find that the optimal strategy for any agent depends on both product composition in the overall market and composition of strategies in the market. In particular, a strategy that does best on pairwise competition may easily do much worse when all are present, leading, in some cases, to a “paper, stone, scissors” circular hierarchy.

Suggested Citation

  • Donangelo, R. & Hansen, A. & Sneppen, K. & Souza, S.R., 2005. "Need, greed and noise: competing strategies in a trading model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 348(C), pages 496-504.
    • Handle: RePEc:eee:phsmap:v:348:y:2005:i:c:p:496-504
    DOI: 10.1016/j.physa.2004.09.046
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    References listed on IDEAS

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    1. Bouchaud,Jean-Philippe & Potters,Marc, 2003. "Theory of Financial Risk and Derivative Pricing," Cambridge Books, Cambridge University Press, number 9780521819169.
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