|
|
|
|
||||
|
||||
Decoupling Markets and Individuals: Rational Expectations Equilibrium Outcomes from Information Dissemination Among Boundedly-Rational TradersKarim JamalUniversity of Alberta - Department of Accounting, Operations & Information Systems Michael S. MaierUniversity of Alberta - Department of Accounting, Operations and Information Systems Shyam SunderYale University - School of Management July 30, 2012 Cowles Foundation Discussion Paper No. 1868 Abstract: Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate traders’ private information to others. It is known that markets populated by asymmetrically-informed profit-motivated human traders can converge to rational expectations equilibria. This paper reports comparable market outcomes when human traders are replaced by boundedly-rational algorithmic agents who use a simple means - end heuristic. These algorithmic agents lack the capability to optimize; yet outcomes of markets populated by them converge near the equilibrium derived from optimization assumptions. These findings suggest that market structure is an important determinant of efficient aggregate level outcomes, and that care is necessary not to overstate the importance of human cognition and conscious optimization in such contexts.
Number of Pages in PDF File: 31 Keywords: Bounded rationality, Dissemination of asymmetric information, Efficiency of security markets, Minimally-rational agents, Rational expectations, Structural properties of markets JEL Classification: C92, D44, D50, D70, D82, G14 working papers seriesDate posted: August 1, 2012 ; Last revised: January 27, 2013Suggested CitationContact Information
|
|
|||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo2 in 0.516 seconds
