Invisible hand effect in an evolutionary minority game model

Marko Sysi-Aho, Jari Saramäki and Kimmo Kaski

Physica A: Statistical Mechanics and its Applications, 2005, vol. 347, issue C, 639-652

Abstract: In this paper, we study the properties of a minority game with evolution realized by using genetic crossover to modify fixed-length decision-making strategies of agents. Although the agents in this evolutionary game act selfishly by trying to maximize their own performances only, it turns out that the whole society will eventually be rewarded optimally. This “invisible hand” effect is what Adam Smith over two centuries ago expected to take place in the context of free market mechanism. However, this behaviour of the society of agents is realized only under idealized conditions, where all agents are utilizing the same efficient evolutionary mechanism. If on the other hand part of the agents are adaptive, but not evolutionary, the system does not reach optimum performance, which is also the case if part of the evolutionary agents form a uniformly acting “cartel”.

Keywords: Invisible hand effect; Genetic algorithm; Minority game (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:347:y:2005:i:c:p:639-652

DOI: 10.1016/j.physa.2004.08.029

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