The shark game: equilibrium with bounded rationality

Chapter
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 662)

Abstract

We propose an intuitive toy model of a financial market where investors are represented by hungry sharks. Each shark learns the best strategy through a trial and error procedure calibrated to human characteristics. The mix of rewards for eating or not can create a large array of scenarios that can be used to observe the emergence of equilibrium from simple to more realistic situations. Using an agent-based model we create an environment where sharks learn and try to optimize their payoffs. Our preliminary results show that sharks,like investors, can learn to coordinate and generate a equilibrium under rational expectations. We also find cases where equilibrium cannot be found and the situation becomes a minority-type game.

Keywords

Trading Volume Rational Expectation Bounded Rationality Performance Strength American Economic Association 
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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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.CERAG UMR CNRS 5820Grenoble Cedex 9France

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