JustDon’tDoIt

1、Just Dont Do ItMinority Games and the Stock MarketTo start the ball rollingwe go back to where it all beganComparisons with P Beauty ContestIf we assume rationality (game theorists playing), perfect information, we can derive a dominant strategy “0”No matter what our assumptions, any dominant strate

2、gy would always fail in a minority gameSome features of MGNegative feedback Market entry gamesPhase transitionsAs z increasesOther propertiesFrustrationspin glassesIndividual heterogeneityCollective coordinationcollusion?Efficient market hypothesisNo arbitrage hypothesisRandom walk pricesStock marke

3、ts basicsWho puts information in prices? If markets are unpredictable, why are people wasting their time?Prices over the short term do not follow random walksStock markets basics?When there are fewer sellers than buyers, prices go up, sellers profit.When there are fewer buyers than sellers.Gi(t)=-ai

4、(t)*A(t)Minority always wins?Stock markets and MGAssume at t-1/2, agent thinks that p(t) p(t+1)What should the agent do?Place sell orderAgain if p(t) p(t+1)Place buy orderAgent gain/loss isGi$(t+1/2)=ai(t-1/2)*A(t+1/2)The $ GameThe $ game with a Market Maker R(t) = A(t)-SM(t)/lMarket Maker provides

5、clearing mechanismThe $ GameLow values of m, lesser strategies Coordination to only buy or only sellArbitrage the market makerPositive feedbackNon ideal/boom scenariosfinally limited.The $ GameHigh values of m, too many strategiesCurse of intelligenceMarket maker arbitrages agents as a group.Some agents with non equilibrium strategies still manage to profit.The $ GameMGs have a small contribution to self organization of marketsDriving force among agents is to make money and not be i