https://doi.org/10.1007/s100510170250
Transition from coherence to bistability in a model of financial markets
Department of Mathematical Sciences, Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Corresponding author: a rene.dhulst@brunel.ac.uk
Received:
7
August
2000
Revised:
10
September
2000
Published online: 15 April 2001
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite its simplicity, it can mimic a size effect comparable to a crash localized in time. Two extensions of this model are presented that allow to simulate the demand process. One of these extensions has a coherent stable equilibrium and is self-organized, while the other has a bistable equilibrium, with a spontaneous segregation of the population of agents. A new model is introduced to generate a transition between those two equilibriums. We show that the coherent state is dominant up to an equal mixing of the two extensions. We focus our attention on the microscopic structure of the investment rate, which is the main parameter of the original model. A constant investment rate seems to be a very good approximation.
PACS: 02.50.Le – Decision theory and game theory / 02.50.Ng – Distribution theory and Monte Carlo studies / 05.65.+b – Self-organized systems
© EDP Sciences, Società Italiana di Fisica, Springer-Verlag, 2001
