Price percolation model

Yasuhiro Kanai, Keiji Abe and Yoichi Seki

Physica A: Statistical Mechanics and its Applications, 2015, vol. 427, issue C, 226-233

Abstract: We propose a price percolation model to reproduce the price distribution of components used in industrial finished goods. The intent is to show, using the price percolation model and a component category as an example, that percolation behaviors, which exist in the matter system, the ecosystem, and human society, also exist in abstract, random phenomena satisfying the power law. First, we discretize the total potential demand for a component category, considering it a random field. Second, we assume that the discretized potential demand corresponding to a function of a finished good turns into actual demand if the difficulty of function realization is less than the maximum difficulty of the realization. The simulations using this model suggest that changes in a component category’s price distribution are due to changes in the total potential demand corresponding to the lattice size and the maximum difficulty of realization, which is an occupation probability. The results are verified using electronic components’ sales data.

Keywords: Percolation; Power law; Price distribution; Pricing process; Price fluctuation (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:427:y:2015:i:c:p:226-233

DOI: 10.1016/j.physa.2015.02.021

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