Title: Agent-based simulation of a simple market

Authors: Miklos N. Szilagyi, Pick Chung Lau, Gavin Kumar Ananda Krishnan

Addresses: Department of Electrical and Computer Engineering, University of Arizona, Tucson, AZ 85721, USA. ' Department of Electrical and Computer Engineering, University of Arizona, Tucson, AZ 85721, USA. ' Department of Electrical and Computer Engineering, University of Arizona, Tucson, AZ 85721, USA

Abstract: We present an agent-based iterated simulation of a simple market structure. The simulation is based on trade and price satisfaction (payoff) functions for both buyers and sellers. The participants are trying to follow the behaviour of those of their neighbours that have received the highest payoff in the previous iteration. This results in trading and transformation of buyers into sellers and vice versa. Equilibrium conditions develop. The ratio of buyers and sellers fluctuates around this equilibrium. We have investigated two cases: slight and strong domination of the price satisfaction over the trade satisfaction. The results show how the global equilibrium condition depends on the local price. The simulation is a special case of the Chicken Game.

Keywords: agent-based simulation; Chicken Game; market simulation; payoff; price satisfaction; trade satisfaction.

DOI: 10.1504/IJIEM.2009.022934

International Journal of Internet and Enterprise Management, 2009 Vol.6 No.1, pp.41 - 73

Published online: 04 Feb 2009 *

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