Effects of dynamic response time in an evolving market

Li-Xin Zhong, Tian Qiu, Bi-Hui Chen and Cai-Feng Liu

Physica A: Statistical Mechanics and its Applications, 2009, vol. 388, issue 5, 673-681

Abstract: Considering the time scales of global information and personal reaction, we study the role of dynamic response time in the evolution of collective behavior in an evolving market. The insensitiveness to the market information makes the population cluster around a kind of extreme behavior, in which they always follow what happened last time, while a sensitive population tends to self-segregate into opposing groups. The average success rate R among all the agents is found to have a nonmonotonic dependence on the time scale parameter q. There exists a critical value below (above) which R decreases (increases) with the rise of q. Theoretical analyses demonstrate that the higher efficiency found in the market with an insensitive population is related to its predictability. In such a predictable market, the agents following current prediction have a higher winning probability than those rejecting it. Analytical calculations are in good agreement with numerical data.

Keywords: Complex adaptive systems; Time scales; Evolutionary minority game; Econophysics (search for similar items in EconPapers)
Date: 2009
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:388:y:2009:i:5:p:673-681

DOI: 10.1016/j.physa.2008.11.006

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