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Emergent organization in a model market

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  • Yadav, Avinash Chand
  • Manchanda, Kaustubh
  • Ramaswamy, Ramakrishna

Abstract

We study the collective behaviour of interacting agents in a simple model of market economics that was originally introduced by Nørrelykke and Bak. A general theoretical framework for interacting traders on an arbitrary network is presented, with the interaction consisting of buying (namely consumption) and selling (namely production) of commodities. Extremal dynamics is introduced by having the agent with least profit in the market readjust prices, causing the market to self-organize. In addition to examining this model market on regular lattices in two-dimensions, we also study the cases of random complex networks both with and without community structures. Fluctuations in an activity signal exhibit properties that are characteristic of avalanches observed in models of self-organized criticality, and these can be described by power–law distributions when the system is in the critical state.

Suggested Citation

  • Yadav, Avinash Chand & Manchanda, Kaustubh & Ramaswamy, Ramakrishna, 2017. "Emergent organization in a model market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 482(C), pages 118-126.
    • Handle: RePEc:eee:phsmap:v:482:y:2017:i:c:p:118-126
    DOI: 10.1016/j.physa.2017.04.029
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    References listed on IDEAS

    as
    1. Per Bak & Simon F. Norrelykke & Martin Shubik, 1998. "The Dynamics of Money," Research in Economics 98-11-102e, Santa Fe Institute.
    2. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-141, February.
    3. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
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