Author(s)

Y. Semet, S. Gelly, M. Schoenauer & M. Sebag

Abstract

Pertaining to Agent-based Computational Economics (ACE), this work presents two models for the rise and downfall of speculative bubbles through an exchange price fixing based on a double auction mechanism. The first model is based in a finite time horizon context where total expected dividends decrease along with time. The second model follows the greater fool hypothesis: an agent behaviour depends on the comparison of its estimation of risk with that of a virtual greater fool. Simulations shed some light on the influent parameters and the necessary conditions for the appearance of speculative bubbles in an asset market within the considered framework. Keywords: agent-based markets, speculative bubbles, zero intelligence traders. 1 Introduction Beyond the standard economic models, traditionally centered on Rational Expectations Equili

Keywords