Journal of Evolutionary Economics

, Volume 22, Issue 1, pp 161–201 | Cite as

Markets as communication systems

Simulating and assessing the performance of market networks
  • Franck Galtier
  • François Bousquet
  • Martine Antona
  • Pierre Bommel
Regular Article

Abstract

As the information relative to endowments, costs and preferences is dispersed among many agents, the quality of resource allocation depends on the ability of markets to communicate information inside the economic system. Because information is transferred through negotiation and transaction behaviors, the network of trading relations defines the channels through which it flows. In the present study, we use new computational tools to analyze the performance of two wholesale trade institutions widely used around the world: network trading and marketplace trading. Whilst network trading and marketplace trading disseminate far fewer bits of information than a perfectly transparent benchmark market, they often manage to generate an allocation of resources that is almost as good. In many cases, network trading proves more effective than marketplace trading (contrary to a common preconception). This surprising performance of network trading is linked to a form of indirect arbitrage induced by connections between networks. Implications for market design and public policy making are presented, along with prospects for further research.

Keywords

Market design Market process Informational efficiency Agent-based computational economics Multi-agent system Decentralized market 

JEL Classification

C63 D82 D83 D85 L1 Q13 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  • Franck Galtier
    • 1
  • François Bousquet
    • 2
  • Martine Antona
    • 2
  • Pierre Bommel
    • 3
  1. 1.UMR MOISACIRADMontpellier Cedex 5France
  2. 2.UPR GREENCIRADMontpellier Cedex 5France
  3. 3.UPR GREENCIRAD & UnB Faculdade de tecnologiaBrasiliaBrazil

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