(no subject)

From: the Campaign for Real Economics (camrec@mmu.ac.uk)
Date: Fri Feb 26 1999 - 10:12:16 GMT


Date: Fri, 26 Feb 1999 10:12:16 +0000
Message-Id: <>
To: bogus
From: camrec@mmu.ac.uk (the Campaign for Real Economics)
Subject: 


Message-Id: <199902261009.KAA18344@alpheratz.cpm.aca.mmu.ac.uk>
To: CAMREC list members <camrec@mmu.ac.uk>
From: the Campaign for Real Economics <camrec@mmu.ac.uk>
Date: Fri, 26 Feb 1999 10:12:16 +0000
Subject: Re: "CAMREC: " How do market-makers really set their prices?

the Campaign for Real Economics wrote:

> Does anybody know of any studies (or even ancedotal description) of how
> jobbers or market makers set their prices? I am interested in any
> *actual* rules-of-thumb or systems used rather than how they are
> supposed to set their prices.
>
> Thanks in advance.
>
> Regards.
>
> --------------------------------------------------
> Bruce Edmonds,
> Centre for Policy Modelling,
> Manchester Metropolitan University, Aytoun Bldg.,
> Aytoun St., Manchester, M1 3GH. UK.
> http://www.cpm.mmu.ac.uk/~bruce
>
> ===============================================================
> This was distributed via the Campaign for Real Economics (CAMREC)
> For information about CAMREC the list (e.g. unsubscribing) see:
> http://www.cpm.mmu.ac.uk/camrec/about.html

I made a one-year research for the final Thesis
of my Italian Laurea in Economics with the title:
"Neural Networks and Genetic Algorithms for the
Simulation Models of Bounded Rationality Theory –
An Application to Oligopolistic Markets".

An article extracted from the thesis won the
“Angelo Costa Economics Undergraduate Thesis Award 1997”
and has been published in:
“Baldassarre G. (1997),
Neural Networks and Genetic Algorithms for the
Simulation Models of Bounded Rationality Theory –
An Application to Oligopolistic Markets,
Rivista di Politica Economica,
December - Year LXXXVII, No. 12, pp. 107-145”
both in Italian and in English.

In the article I stress the limits of the approach used by the
orthodox economic school and I try to illustrate the potentiality
of the simulation approach through a specific study.
The particular the study involves the simulation of an oligopolistic
market where two or three agents engage a competition based
on the fixation of the price of an homogeneous product,
in order to increase their profits and, indirectly, their market shares.

The work could be interesting for you because I show that the agents,
endowed with limited cognitive capabilities,
do not use all the information available,
(for example about the actions of adversaries)
but fix the price on the base of their direct costs.
In doing this they use a rule-of-thumb fixing-price routine
based on the “mark-up rule” of Sylos Labini:
Price = (1 + certain percent) * direct costs.
I observe that Sylos Labini proposed his
mark-up rule on the base of observation, even if not systematic and
scientific,
of real bahaviours of business men and companies.

The article has some drawbacks due to my (and my supervisors’!)
inexperience in the field of simulations at that time.
In particular the “evaluation part” of the cognitive architecture
of agents is not very good,
the article does not show many runs with different seeds and,
more important, does not present a complete exploration of the parameter
space.
However I think it proposes interesting ideas.

If you are interested in the article, I can mail it to you
(I do not know about the availability of the Journal out of Italy).
I was already thinking, before your e-mail,
about putting the article in the Internet and
asking you to have a link to it from the CAMREC web.
If you think it is a good idea, I can ask the permission from the editor
of “Rivista di Politica Economica”.

Regards.

PS:
I am one of the people who studied economics for some years and,
being unsatisfied with its current dominant approach,
decided to switch to another approach/field
(computer science, simsoc, studying of transmission of culture).
For this reason I am very glad about, and warmly applaud,
initiatives like yours of CAMREC.

As an (ex?) economist I fully subscribe the principles
set down in the manifesto of CAMREC.

__________________________________________________
GIANLUCA BALDASSARRE
Ph.D. student,
"Artificial Societies:
MAS and ALife simulations of evolution of culture",
Department of computer science,
University of Essex, CO4 3SQ,
Colchester, Essex, United Kingdom.
_____________________________________________________



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