The importance of timescales: simple models for economic markets

Kai Nagel, Martin Shubik and Martin Strauss

Physica A: Statistical Mechanics and its Applications, 2004, vol. 340, issue 4, 668-677

Abstract: This paper considers a simple model of an economy. The economy consists of agents. Each agent produces exactly one good. The good is sold on the market and the agent uses the resulting money to buy many other goods. All agents have the goal to maximize their own utility, which consists of a positive contribution from consumption, and a negative contribution from work. The problem for the agent thus is to balance work and consumption. In contrast to many other economic models, this model prescribes the process in all completeness. The paper looks both at analytical solutions and at simulation results. A particularly important results is that a well-defined market only emerges when prices adapt on a much slower time scale than consumption. This makes clear that a functioning market does not just emerge by itself.

Keywords: Multi-agent simulation; Economic markets; Nash equilibrium (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S037843710400576X
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:340:y:2004:i:4:p:668-677

DOI: 10.1016/j.physa.2004.05.025

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().