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Paradigm shifts

Author

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  • Guy Maugis, Pierre-André

Abstract

The author studies the evolution of the number of coexisting beliefs in a financial market. Crucially, he undertakes to do so in a framework where the paradigms, beliefs, and models driving agents behavior are left totally unspecified; i.e., the author does not make any parametric or non-parametric model assumptions. The overreaching aim of this exercise is to characterise the dynamic of the variety of beliefs in an auction-based financial market independently of any assumptions on agents behaviors. The resulting framework may be seen as an abstract agent-based model. In a computer experiment the authors exhibits a cycle between two states, so that either all agents act according to the same belief, or there is no leading belief; i.e., there is one dominating belief, or none. Further, the author finds that the frequency of this cycle is positively linked to the quality of the information available to the agents.

Suggested Citation

  • Guy Maugis, Pierre-André, 2019. "Paradigm shifts," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-9.
    • Handle: RePEc:zbw:ifweej:201943
    DOI: 10.5018/economics-ejournal.ja.2019-43
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    agent based model; information cascade; herding behavior;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General

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