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A Simple Micro-Model of Market Dynamics

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Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE,volume 531)

Summary

We present a simple agent based model aimed at the qualitative description of trading activity in a “stylized” financial market. A two assets economy is considered, with a bond providing a riskless constant return and a risky stock, paying constant dividends, whose price is fixed via Walrasian auction. The market participants are speculators described as myopic utility maximizers provided with limited forecasting ability. If one varies the parameters describing the market and the agents behavior, the model presents many distinct “phases”. In particular, the no-arbitrage “fundamental” price can emerge as a stable fixed point, while for different parameterizations the market shows chaotic dynamics with speculative bubbles and crashes.

Keywords

  • Demand Curve
  • Global Attractor
  • Risky Asset
  • Average Price
  • Strange Attractor

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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© 2004 Springer-Verlag Berlin Heidelberg

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Bottazzi, G. (2004). A Simple Micro-Model of Market Dynamics. In: Gallegati, M., Kirman, A.P., Marsili, M. (eds) The Complex Dynamics of Economic Interaction. Lecture Notes in Economics and Mathematical Systems, vol 531. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17045-4_12

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  • DOI: https://doi.org/10.1007/978-3-642-17045-4_12

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-40497-2

  • Online ISBN: 978-3-642-17045-4

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