From wheel of fortune to wheel of misfortune: Financial crises, cycles and consumer predation

Olivier Mesly, David W. Shanafelt and Nicolas Huck

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: Predator-prey dynamics are widely used in ecology but seldom utilized in economics and marketing, despite their ability to express financial market agents’ behaviors when considered in combination with economic cycles and financial crises. This multidisciplinary paper presents a stylized framework of a market cycle that combines the notions of supply and demand and predator-prey interactions between buyers and sellers of housing mortgages. We illustrate our framework using data from the Global Financial Crisis and a Lotka-Volterra predator-prey model. We find that with our framework we are able to capture the dynamics of the market, particularly the peak and decline in the number of sellers and sold subprime mortgages. Our framework sheds a new light on consumer behaviors, pinpointing how they can put themselves into vulnerable prey positions. This paper is one of the first of its kind to propose market phases and predator-prey dynamics nested in economic cycles and consumer buying trends.

Keywords: Toxic products; predator-prey behavior; financial crisis; regulations; consumer abuse. (search for similar items in EconPapers)
JEL-codes: M31 N22 N42 O16 P46 R31 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-his
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: From wheel of fortune to wheel of misfortune: Financial crises, cycles, and consumer predation (2020)
Working Paper: From wheel of fortune to wheel of misfortune: Financial crises, cycles, and consumer predation (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2020-35

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