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From wheel of fortune to wheel of misfortune : Financial crises, cycles, and consumer predation

Author

Listed:
  • Olivier Mesly

    (ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

  • David W. Shanafelt

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Nicolas Huck

    (ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

  • François-Éric Racicot

    (IPAG Business School - Chaire IPAG "Entreprise Inclusive" - IPAG Business School, École de gestion Telfer / Université d'Ottawa - University of Ottawa [Ottawa])

Abstract

Predator-prey dynamics are widely used in ecology but seldom utilized in economics and marketing, despite their ability to express financial market agents' behaviors when considered in combination with economic cycles and financial crises. This multidisciplinary article presents a stylized framework of a market cycle that combines the notions of supply and demand and predator-prey interactions between buyers and sellers of housing mortgages. We illustrate our framework using data from the Global Financial Crisis and a Lotka-Volterra predator-prey model. We find that with our framework we can capture the dynamics of the market, particularly the peak and decline in the number of sellers and sold subprime mortgages. Our framework sheds a new light on consumer behaviors, pinpointing how they can put themselves into vulnerable prey positions. This article is one of the first of its kind to propose market phases and predator-prey dynamics nested in economic cycles and consumer buying trends.

Suggested Citation

  • Olivier Mesly & David W. Shanafelt & Nicolas Huck & François-Éric Racicot, 2020. "From wheel of fortune to wheel of misfortune : Financial crises, cycles, and consumer predation," Post-Print hal-02973657, HAL.
    • Handle: RePEc:hal:journl:hal-02973657
    DOI: 10.1111/joca.12326
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    Cited by:

    1. Olivier Mesly & Hareesh Mavoori & Nicolas Huck, 2023. "The Role of Financial Spinning, Learning, and Predation in Market Failure," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 517-543, March.

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    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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