Market interactions and agents' beliefs transmission
University of Turin and Multi-Agent Systems Division, ISI Fo
University of Turin and Centre of Law, Economics and Institutions
Last modified: May 8, 2007
The paper studies the role of different exchange mechanisms in the transmission of agents' price beliefs. According to Hayek markets can be considered as systems where agents convey information to each other and form their beliefs about the value of goods, expressed by their reservation prices. The price structure for a given commodity should reflect the degree by which the information on the value of the good is spread among market participants. In this perspective, the market could be considered as a multi agent informational game where sellers are the price information generators and buyers the price information takers. Using Agent Based Computational Economics (ACE) approach under the assumption of behavioural learning by agents, we model a retail market where agents interact with two opposite exchange mechanisms. The former is a posted price mechanism with impersonal relations and the latter is based on bargaining for the price setting with interpersonal relations between sellers and buyers. The main findings of the paper are on the virtues and drawbacks of the interpersonal exchange mechanism. Indeed, the main research question concerns how the interpersonal exchange mechanism affects the transmission of price beliefs between sellers and buyers. If information were perfectly coordinated and diffused throughout the buyers by market institutions, loyalty emerges and the prices would resemble the ideal competitive market prices a la Bertrand.