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Simple Agents, Intelligent Markets

Author

Listed:
  • Karim Jamal

    (University of Alberta)

  • Michael Maier

    (University of Alberta)

  • Shyam Sunder

    (Yale University)

Abstract

Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate agents’ private information to others. Markets populated by human agents are known to be capable of converging to rational expectations equilibria. This paper reports comparable market outcomes when human agents are replaced by boundedly-rational algorithmic agents who use a simple means-end heuristic. These algorithmic agents lack the capability to optimize; yet outcomes of markets populated by them converge near the equilibrium derived from optimization assumptions. These findings point to market structure (rather than cognition or optimization) being an important determinant of efficient aggregate level outcomes.

Suggested Citation

  • Karim Jamal & Michael Maier & Shyam Sunder, 2017. "Simple Agents, Intelligent Markets," Computational Economics, Springer;Society for Computational Economics, vol. 49(4), pages 653-675, April.
    • Handle: RePEc:kap:compec:v:49:y:2017:i:4:d:10.1007_s10614-016-9582-3
    DOI: 10.1007/s10614-016-9582-3
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    References listed on IDEAS

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    1. Martin Angerer & Juergen Huber & Martin Shubik & Shyam Sunder, 2010. "An economy with personal currency: theory and experimental evidence," Annals of Finance, Springer, vol. 6(4), pages 475-509, October.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Nobody knows anything
      by chris in Stumbling and Mumbling on 2016-05-03 18:04:59

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    Cited by:

    1. Lu, Dong & Zhan, Yaosong, 2022. "Over-the-counter versus double auction in asset markets with near-zero-intelligence traders," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).

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    More about this item

    Keywords

    Rational expectations; Bounded rationality; Means-end heuristic; Information dissemination; Minimally intelligent agents;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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