Democracy versus dictatorship in self-organized models of financial markets

R. D'Hulst and G.J. Rodgers

Physica A: Statistical Mechanics and its Applications, 2000, vol. 280, issue 3, 554-565

Abstract: Models to mimic the transmission of information in financial markets are introduced. As an attempt to generate the demand process, we distinguish between dictatorship associations, where groups of agents rely on one of them to make decision, and democratic associations, where each agent takes part in the group decision. In the dictatorship model, agents segregate into two distinct populations, while the democratic model is driven towards a critical state where groups of agents of all sizes exist. Hence, both models display a level of organization, but only the democratic model is self-organized. We show that the dictatorship model generates less-volatile markets than the democratic model.

Keywords: Herding; Economy; Market organization; Decision process (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:280:y:2000:i:3:p:554-565

DOI: 10.1016/S0378-4371(00)00089-3

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