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Adaptive Learning and Emergent Coordination in Minority Games

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  • Giulio Bottazzi, Giovanna Devetag, Giovanni Dosi

Abstract

The work studies the properties of a coordination game in which agents repeatedly compete to be in the population minority. The game reflects some essential features of those economic situations in which positive rewards are assigned to individuals who behave in opposition to the modal behavior in a population. Here we model a group of heterogeneous agents who adaptively learn and we investigate the transient and long-run aggregate properties of the system in terms of both allocative and informational efficiency. Our results show that, first, the system long-run properties strongly depend on the behavioral learning rules adopted, and, second, adding noise at the individual decision level and hence increasing heterogeneity in the population substantially improve aggregate welfare, although at the expense of a longer adjustment phase. In fact, the system achieves in that way a higher level of efficiency compared to that attainable by perfectly rational and completely informed agents.

Suggested Citation

  • Giulio Bottazzi, Giovanna Devetag, Giovanni Dosi, 2001. "Adaptive Learning and Emergent Coordination in Minority Games," Computing in Economics and Finance 2001 20, Society for Computational Economics.
    • Handle: RePEc:sce:scecf1:20
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    Cited by:

    1. Kets, W., 2007. "The Minority Game : An Economics Perspective," Other publications TiSEM 65d52a6a-b27d-45a9-93a7-e, Tilburg University, School of Economics and Management.
    2. Giorgio Fagiolo & Marco Valente, 2005. "Minority Games, Local Interactions, and Endogenous Networks," Computational Economics, Springer;Society for Computational Economics, vol. 25(1), pages 41-57, February.
    3. Duffy, John, 2006. "Agent-Based Models and Human Subject Experiments," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 19, pages 949-1011, Elsevier.
    4. Földy, Csaba & Somogyvári, Zoltán & Érdi, Péter, 2003. "Hierarchically organized minority games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 735-742.

    More about this item

    Keywords

    minority game; coordination; speculation; adaptive learning; market efficiency; emergent properties;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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