A thermal model for adaptive competition in a market

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  • 29 March 1999
Abstract
New continuous and stochastic extensions of the minority game, devised as a fundamental model for a market of competitive agents, are introduced and studied. The new formulation reproduces the key macroscopic features of the original model, without the need for some of its special assumptions and, most importantly, it demonstrates the crucial role of stochastic decision-making, where the agents are not always able to discern what the optimum conduct is. Furthermore, this formulation provides an exact but novel non-linear equation for the time evolution of the strategy-use probability.

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