Adaptive Learning and Emergent Coordination in Minority Games

Giulio Bottazzi, Giovanna Devetag and Giovanni Dosi

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: The work studies the properties of a coordination game in which agents repeatedly compete to be in the population minority. The game reflects some essential features of those economic situations in which positive rewards are assigned to individuals who behave in opposition to the modal behavior in a population. Here we model a group of heterogeneous agents who adaptively learn and we investigate the transient and long-run aggregate properties of the system in terms of both allocative and informational efficiency. Our results show that, first, the system long-run properties strongly depend on the behavioral learning rules adopted, and, second, adding noise at the individual decision level and hence increasing heterogeneity in the population substantially improve aggregate welfare, although at the expense of a longer adjustment phase. In fact, the system achieves in that way a higher level of efficiency compared to that attainable by perfectly rational and completely informed agents.

Keywords: minority game; speculation; adaptive learning; market efficiency; emergent properties (search for similar items in EconPapers)
Date: 1999-12-03
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Adaptive Learning and Emergent Coordination in Minority Games (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:1999/24

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