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Stochastic Model of Thin Market with Divisible Commodity

Author

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  • Martin Smid

    (Institute of Information Theory & Automation of the Academy of Sciences of the Czech Republic)

Abstract

We suggest a model of (a thin) market at which the number of participants is random with Poisson distribution. We provide a formula for joint distribution of the market price and the traded volume. We derive an asymptotic distribution of the quantities. We find that, according to our model, with increasing intensity of the participants' number, the fluctuations of the market price vanish while the variance of the traded volume increases.

Suggested Citation

  • Martin Smid, 2004. "Stochastic Model of Thin Market with Divisible Commodity," GE, Growth, Math methods 0409006, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpge:0409006
    Note: Type of Document - pdf; pages: 10
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ge/papers/0409/0409006.pdf
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    More about this item

    Keywords

    thin market; market price; traded volume; asymptotic distribution;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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