D Challet et al J. Stat. Mech. (2008) L04004 doi:10.1088/1742-5468/2008/04/L04004
D Challet1,2, A De Martino3 and M Marsili4
Show affiliationsWe explore the effect of discounting and experimentation in a simple model of interacting adaptive agents. Agents belong to either of two types and each has to decide whether to participate in a game or not, the game being profitable when there is an excess of players of the other type. We find the emergence of large fluctuations as a result of the onset of a dynamical instability which may arise discontinuously (increasing the discount factor) or continuously (decreasing the experimentation rate). The phase diagram is characterized in detail and noise amplification close to a bifurcation point is identified as the physical mechanism behind the instability.
89.65.Gh Economics; econophysics, financial markets, business and management
05.70.Fh Phase transitions: general studies
91B26 Market models (auctions, bargaining, bidding, selling, etc.)
91B28 Finance, portfolios, investment
82C26 Dynamic and nonequilibrium phase transitions (general)
Issue 04 (April 2008)
Received 8 February 2008, accepted for publication 25 March 2008
Published 14 April 2008
D Challet et al J. Stat. Mech. (2008) L04004
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