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The shark game: equilibrium with bounded rationality

In: Managing Market Complexity

Author

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  • Lucian Daniel Stanciu-Viziteu

    (CERAG UMR CNRS 5820)

Abstract

We propose an intuitive toy model of a financial market where investors are represented by hungry sharks. Each shark learns the best strategy through a trial and error procedure calibrated to human characteristics. The mix of rewards for eating or not can create a large array of scenarios that can be used to observe the emergence of equilibrium from simple to more realistic situations. Using an agent-based model we create an environment where sharks learn and try to optimize their payoffs. Our preliminary results show that sharks,like investors, can learn to coordinate and generate a equilibrium under rational expectations. We also find cases where equilibrium cannot be found and the situation becomes a minority-type game.

Suggested Citation

  • Lucian Daniel Stanciu-Viziteu, 2012. "The shark game: equilibrium with bounded rationality," Lecture Notes in Economics and Mathematical Systems, in: Andrea Teglio & Simone Alfarano & Eva Camacho-Cuena & Miguel GinĂ©s-Vilar (ed.), Managing Market Complexity, edition 127, chapter 0, pages 103-111, Springer.
    • Handle: RePEc:spr:lnechp:978-3-642-31301-1_9
    DOI: 10.1007/978-3-642-31301-1_9
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    Cited by:

    1. Tshilidzi Marwala, 2013. "Semi-bounded Rationality: A model for decision making," Papers 1305.6037, arXiv.org.

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