Emergence of two-phase behavior in markets through interaction and learning in agents with bounded rationality

Details Emergence of two-phase behavior in markets through interaction and learning in agents with bounded rationality Emergence of two-phase behavior in markets through interaction and learning in agents with bounded rationality

2005-05-03

arxiv.org/abs/physics/0505020v1

Physics

Physics and Society

5 pages, 2 figures, to appear in "Practical Fruits of Econophysics", Proc. 3rd Nikkei Econophysics Symposium, Tokyo, Nov 2004

Scientific paper

Phenomena which involves collective choice of many agents who are interacting with each other and choosing one of several alternatives, based on the limited information available to them, frequently show switching between two distinct phases characterized by a bimodal and an unimodal distribution respectively. Examples include financial markets, movie popularity and electoral behavior. Here we present a model for this biphasic behavior and argue that it arises from interactions in a local neighborhood and adaptation & learning based on information about the effectiveness of past choices.

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