The Role of Financial Spinning, Learning, and Predation in Market Failure

Olivier Mesly, Hareesh Mavoori and Nicolas Huck
Additional contact information
Hareesh Mavoori: ICN Business School
Nicolas Huck: ICN Business School

Journal of the Knowledge Economy, 2023, vol. 14, issue 1, No 23, 517-543

Abstract: Abstract This paper examines the possibility that market failures may be explained by predatory information flows between sellers and buyers when they act in dysfunctional relationships characterized by predator–prey dynamics and a behavioral pattern we define as “financial spinning.” The Global Financial Crisis serves as an example, among many others. It involved predatory mortgages and heavy securitization, and illustrates the fact that some sellers of toxic products (individuals and corporations) may have strong incentives to get buyers-prey to become disconnected from their financial needs, goals, and preferences, while accumulating debt. This may happen even in the context of a knowledge economy, and may lead the market towards failure. Computer-driven trajectory exploration based on learning-factored Lotka-Volterra equations shows that the predatory, noxious information is beneficial to sellers-predators but only up to a point. Consumers, for their part, are not always willing or able to receive sufficient information, which would otherwise allow them to protect themselves. Our approach may also guide corporations’ efforts towards improving their customer relationships, social image, and community participation. We contribute to the use of Lotka-Volterra equations and trajectory exploration in the context of predatory asymmetry of information at the interpersonal, sellers-buyers level, of spinning and of market failure.

Keywords: Asymmetry of information; Predator–prey dynamics; Moral hazard; Market failure; Financial spinning; Learning (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-021-00862-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jknowl:v:14:y:2023:i:1:d:10.1007_s13132-021-00862-2

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-021-00862-2

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().