Tâtonnement, Approach to Equilibrium and Excess Volatility in Firm Networks

Théo, Dessertaine,; Moran, José; Benzaquen, Michael; Bouchaud, Jean‐Philippe

doi:10.2139/ssrn.3745898

Cited by 5 publications

(2 citation statements)

References 75 publications

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“…We have to train our minds to grasp these collective phenomena and to understand how and why some scenarios can materialise and others not. The versatility of ABMs allows one to include ingredients that are almost impossible to accommodate in standard economic models and explore their impact on the dynamics of the systems [ 36 , 37 ], in particular the inability of some of these a priori well-behaved economic models to ever reach equilibrium [ 38 ]. For a recent review of macroeconomic ABMs, see, e.g., [ 39 ].…”

Section: Radical Complexity and Scenario Based Macro-economicsmentioning

confidence: 99%

Radical Complexity

Bouchaud

2021

Entropy

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This is an informal and sketchy review of five topical, somewhat unrelated subjects in quantitative finance and econophysics: (i) models of price changes; (ii) linear correlations and random matrix theory; (iii) non-linear dependence copulas; (iv) high-frequency trading and market stability; and finally—but perhaps most importantly—(v) “radical complexity” that prompts a scenario-based approach to macroeconomics heavily relying on Agent-Based Models. Some open questions and future research directions are outlined.

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Section: Radical Complexity and Scenario Based Macro-economicsmentioning

confidence: 99%

Radical Complexity

Bouchaud

2021

Entropy

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“…In a follow-up paper[42] we shall introduce precautionary savings and interest rates, which lead to the appearance of inflationary equilibria.…”

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confidence: 99%

Out-of-Equilibrium Dynamics and Excess Volatility in Firm Networks

Théo¹,

Morán²,

Benzaquen³

et al. 2020

Preprint

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Nonequilibrium phase transitions in competitive markets caused by network effects

Lucas

2022

Proc. Natl. Acad. Sci. U.S.A.

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Network effects are the added value derived solely from the popularity of a product in an economic market. Using agent-based models inspired by statistical physics, we propose a minimal theory of a competitive market for (nearly) indistinguishable goods with demand-side network effects, sold by statistically identical sellers. With weak network effects, the model reproduces conventional microeconomics: there is a statistical steady state of (nearly) perfect competition. Increasing network effects, we find a phase transition to a robust nonequilibrium phase driven by the spontaneous formation and collapse of fads in the market. When sellers update prices sufficiently quickly, an emergent monopolist can capture the market and undercut competition, leading to a symmetry- and ergodicity-breaking transition. The nonequilibrium phase simultaneously exhibits three empirically established phenomena not contained in the standard theory of competitive markets: spontaneous price fluctuations, persistent seller profits, and broad distributions of firm market shares.

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Tâtonnement, Approach to Equilibrium and Excess Volatility in Firm Networks

Cited by 5 publications

References 75 publications

Radical Complexity

Radical Complexity

Out-of-Equilibrium Dynamics and Excess Volatility in Firm Networks

Nonequilibrium phase transitions in competitive markets caused by network effects

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