Effects of payoff functions and preference distributions in an adaptive population

Details Effects of payoff functions and preference distributions in an adaptive population Effects of payoff functions and preference distributions in an adaptive population

2007-06-21

arxiv.org/abs/0706.3122v2

Phys. Rev. E 77, 031116 (2008)

Economy

Quantitative Finance

Statistical Finance

Scientific paper

10.1103/PhysRevE.77.031116

Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or quadratic payoff functions to evaluate their strategies. We find that the fluctuations of the population making certain decisions (the volatility) depends on the diversity of the distribution of the initial preferences of strategies. When the diversity decreases, more agents tend to adapt their strategies together. In systems with linear payoffs, this results in dynamical transitions from vanishing volatility to a non-vanishing one. For low signal dimensions, the dynamical transitions for the different signals do not take place at the same critical diversity. Rather, a cascade of dynamical transitions takes place when the diversity is reduced. In contrast, no phase transitions are found in systems with the quadratic payoffs. Instead, a basin boundary of attraction separates two groups of samples in the space of the agents' decisions. Initial states inside this boundary converge to small volatility, while those outside diverge to a large one. Furthermore, when the preference distribution becomes more polarized, the dynamics becomes more erratic. All the above results are supported by good agreement between simulations and theory.

Affiliated with

Also associated with

No associations

Rating

Effects of payoff functions and preference distributions in an adaptive population does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Effects of payoff functions and preference distributions in an adaptive population, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Effects of payoff functions and preference distributions in an adaptive population will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-192590