Publication: "Fragmentation in trader preferences among multiple markets: market coexistence versus single market dominance"
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Aleksandra Aloric
Aug 26, 2021, 7:17:27 AM8/26/21
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Dear group,
I thought it might be of interest to some of you that our paper, presented last year at the ZI conference, is now published. You can find the paper here, while a copy of the abstract is below for convenience. All the feedback you might have is welcome!
Best wishes,
Aleksandra Alorić
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2021)Fragmentation in trader preferences among multiple markets: market coexistence versus single market dominance R. Soc. open sci.8202233202233 https://doi.org/10.1098/rsos.202233
Abstract
Technological advancement has led to an increase in the number and type of trading venues and a diversification of goods traded. These changes have re-emphasized the importance of understanding the effects of market competition: does proliferation of trading venues and increased competition lead to dominance of a single market or coexistence of multiple markets? In this paper, we address these questions in a stylized model of zero-intelligence traders who make repeated decisions at which of three available markets to trade. We analyse the model numerically and analytically and find that the traders’ decision parameters—memory length and how strongly decisions are based on past success—make the key difference between consolidated and fragmented steady states of the population of traders. All three markets coexist with equal shares of traders only when either learning is too weak and traders choose randomly, or when markets are identical. In the latter case, the population of traders fragments across the markets. With different markets, we note that market dominance is the more typical scenario. Overall we show that, contrary to previous research emphasizing the role of traders’ heterogeneity, market coexistence can emerge simply as a consequence of co-adaptation of an initially homogeneous population of traders.
I thought it might be of interest to some of you that our paper, presented last year at the ZI conference, is now published. You can find the paper here, while a copy of the abstract is below for convenience. All the feedback you might have is welcome!
Best wishes,
Aleksandra Alorić
------------------------------
2021)Fragmentation in trader preferences among multiple markets: market coexistence versus single market dominance R. Soc. open sci.8202233202233 https://doi.org/10.1098/rsos.202233
Abstract
Technological advancement has led to an increase in the number and type of trading venues and a diversification of goods traded. These changes have re-emphasized the importance of understanding the effects of market competition: does proliferation of trading venues and increased competition lead to dominance of a single market or coexistence of multiple markets? In this paper, we address these questions in a stylized model of zero-intelligence traders who make repeated decisions at which of three available markets to trade. We analyse the model numerically and analytically and find that the traders’ decision parameters—memory length and how strongly decisions are based on past success—make the key difference between consolidated and fragmented steady states of the population of traders. All three markets coexist with equal shares of traders only when either learning is too weak and traders choose randomly, or when markets are identical. In the latter case, the population of traders fragments across the markets. With different markets, we note that market dominance is the more typical scenario. Overall we show that, contrary to previous research emphasizing the role of traders’ heterogeneity, market coexistence can emerge simply as a consequence of co-adaptation of an initially homogeneous population of traders.
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