Zero intelligence in economics and finance

Ladley, Dan

doi:10.1017/s0269888912000173

Cited by 56 publications

(36 citation statements)

References 59 publications

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“…LiCalzi and Pellizzari (2008) have shown that the allocative efficiency of the CDA would drop substantially if every transaction did not force agents to submit new orders. Nevertheless, as pointed out in the recent reviews by Duffy (2006) and Ladley (2012), the ZI methodology is useful in studying market design questions, because any effect of design on efficiency under ZI behavior should be attributed solely to the change of market rules.…”

Section: Introductionmentioning

confidence: 99%

Efficiency of continuous double auctions under individual evolutionary learning with full or limited information

et al. 2011

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In this paper we explore how specific aspects of market transparency and agents' behavior affect the efficiency of the market outcome. In particular, we are interested whether learning behavior with and without information about actions of other participants improves market efficiency. We consider a simple market for a homogeneous good populated by buyers and sellers. The valuations of the buyers and the costs of the sellers are given exogenously. Agents are involved in consecutive trading sessions, which are organized as a continuous double auction with order book. Using Individual Evolutionary Learning agents submit price bids and offers, trying to learn the most profitable strategy by looking at their realized and counterfactual or "foregone" payoffs. We find that learning outcomes heavily depend on information treatments. Under full information about actions of others, agents' orders tend to be similar, while under limited information agents tend to submit their valuations/costs. This behavioral outcome results in higher price volatility for the latter treatment. We also find that learning improves allocative efficiency when compared to outcomes Zero-Intelligent traders.

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Section: Introductionmentioning

confidence: 99%

Efficiency of continuous double auctions under individual evolutionary learning with full or limited information

et al. 2011

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“…The goal there is to differentiate effects due to the market mechanism, and effects due to trader strategy: if a phenomenon shows up even when the agents enter into transactions at random, then the phenomenon is due to market effects only Ladley [2013]. In both economics and in econophysics, the behaviour of zero intelligence agents is not taken to represent that of real economic actors.…”

Section: Against Burglar Economicsmentioning

confidence: 99%

Modelling Inequality

Thébault

Bradley

Reutlinger

2018

The British Journal for the Philosophy of Science

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Econophysics is a new and exciting cross-disciplinary research field that applies models and modelling techniques from statistical physics to economic systems. It is not, however, without its critics: prominent figures in more mainstream economic theory have criticised some elements of the methodology of econophysics. One of the main lines of criticism concerns the nature of the modelling assumptions and idealisations involved, and a particular target are 'kinetic exchange' approaches used to model the emergence of inequality within the distribution of individual monetary income. This paper will consider such models in detail, and assess the warrant of the criticisms drawing upon the philosophical literature on modelling and idealisation. Our aim is to provide the first steps towards informed mediation of this important and interesting interdisciplinary debate, and our hope is to offer guidance with regard to both the practice of modelling inequality, and the inequality of modelling practice.

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“…The order-restriction rule is de¯ned as an additional parameter, 2 ½0:0; 1:0, which corresponds to the number of buyers who are probabilistically selected. In the conventional CDA model, an asynchronous update rule can be de¯ned as the one that randomly selects an agent who bids or asks at a given moment [37]. If the selected agent can bid higher than the limit price set by the seller, the buyer and seller can enter into a contract.…”

Section: Asynchronous Trading Represented By Order Restrictionmentioning

confidence: 99%

Intermittent Behavior Induced by Asynchronous Interactions in a Continuous Double Auction Model

Sasai

Gunji

Kinoshita

2017

Advs. Complex Syst.

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Continuous asynchronous trading activity is a key to understanding real-world market behavior. However, it is not easy to implement an agent-based computational market model because of the ambiguity between time and space. In this study, we use a model of asynchrony in a continuous double auction market in the form of noise and order restrictions to link inside-and outside-uncertainties in the economic system. Our model shows intermittent behavior with a small parameter value, which leads to the misapplication of the price-update rule, and consequently drives burst behavior. The statistical property of time development shows a similar tendency to that in previous empirical studies. Thus, it demonstrates the relationship between the asynchronous property and the complexity of economic systems.

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Zero intelligence in economics and finance

Cited by 56 publications

References 59 publications

Efficiency of continuous double auctions under individual evolutionary learning with full or limited information

Efficiency of continuous double auctions under individual evolutionary learning with full or limited information

Modelling Inequality

Intermittent Behavior Induced by Asynchronous Interactions in a Continuous Double Auction Model

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