Adaptive networks of trading agents

Details Adaptive networks of trading agents Adaptive networks of trading agents

2008-04-25

arxiv.org/abs/0804.4152v1

Phys. Rev. E78, 046106 (2008)

Economy

Quantitative Finance

Trading and Market Microstructure

7 figures

Scientific paper

10.1103/PhysRevE.78.046106

Multi-agent models have been used in many contexts to study generic collective behavior. Similarly, complex networks have become very popular because of the diversity of growth rules giving rise to scale-free behavior. Here we study adaptive networks where the agents trade ``wealth'' when they are linked together while links can appear and disappear according to the wealth of the corresponding agents; thus the agents influence the network dynamics and vice-versa. Our framework generalizes a multi-agent model of Bouchand and Mezard, and leads to a steady state with fluctuating connectivities. The system spontaneously self-organizes into a critical state where the wealth distribution has a fat tail and the network is scale-free; in addition, network heterogeneities lead to enhanced wealth condensation.

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