Why Should the Economy be Competitive?

Hugues Bersini () and Nicolas van Zeebroeck
Additional contact information
Hugues Bersini: Université Libre de Bruxelles

A chapter in Emergent Results of Artificial Economics, 2011, pp 117-128 from Springer

Abstract: Abstract Is a competitive free market the most efficient way to maximize welfare and to equally allocate rare resources among economic agents? Economists usually tend to think this is the case. This paper presents a preliminary attempt through an object-oriented multi-agent model to address this question. Agents which are alternatively producers, sellers, buyers and consumers participate in a market to increase their welfare. Two market models are compared: the competitive market, which is a double auction market in which agents attempt to outbid each other in order to buy and sell products, and the random market, in which products are allocated in a random manner. The comparison focuses on wealth creation (a common study) and above all on inequalities in resources allocation (much less frequently addressed). We compute and compare in both cases the money and utility generated within the markets as well as a Gini index that characterizes the degree of inequality in the allocation of these values among agents. In contrast with earlier works, we also compare welfare creation and distribution with more or less intelligent agents who use more or less information provided by the market. The results of hundreds of simulations are analyzed to find that, as is well known, the competitive market creates more value overall but, and generally less accepted and discussed by economists, at the expense of a much greater inequality. We further find that whereas the use of market information by the producers leads to less inequality in both types of markets, the inequality induced by the competitive market depends on the behavior of the agents, suggesting that it is both the institutions and the agents that foster inequality in competitive market structures.

Keywords: Competitive Market; Gini Index; Lorenz Curve; Transaction Price; Total Wealth (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:lnechp:978-3-642-21108-9_10

Ordering information: This item can be ordered from
http://www.springer.com/9783642211089

DOI: 10.1007/978-3-642-21108-9_10

Access Statistics for this chapter

More chapters in Lecture Notes in Economics and Mathematical Systems from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().