Analyzing the Dynamics of Relative Prices on a Market with Speculative and Non-Speculative Agents Based on the Evolutionary Model

by Dospinescu, Andrei Silviu
Published in Romanian Journal of Economic Forecasting
, 2011, volume 14 issue 1, 72-87

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The paper deals with an evolutionary model focused on the relation between the behavior of prices and the structure of the population of economic agents. The model allows for identification of the short-term behavior of prices and the dynamics of the population of economic agents in the context of seven scenarios. These scenarios are a combination of four key factors: market regulations, the maturity of the market; the intervention of the state on the market supply side and the modifications of the incentives to speculate and not-speculate. The main findings of the simulation of the scenarios are: i) The presence of speculators leave long lasting effects which do not die out with the decrease in the number of speculators; ii) In the presence of high speculations the intervention of the state can act as an anchor to the market helping to lower the prices; iii) The market forces have a more lasting effect than the state regulation mechanisms.

Keywords: relative prices, speculative and non-speculative agents, evolutionary model
JEL Classification: C15, C73, E37