Complex Economics: Individual and Collective Rationality by Alan Kirman

Author:Alan Kirman
Language: eng
Format: mobi, pdf
Published: 2010-09-05T22:00:00+00:00

Figure 3.14 The distribution of prices.

Source: Kirman and Vriend (2001).

sellers when the buyer systematically visits each seller in turn, that is, when he has the most extreme ‘shopping around’ behaviour. More specifically, the loyalty index is given by:

This is an indicator of how often buyer i visits seller j. It is a global statistic covering the whole period but there is a discount factor represented by . The parameter rij(t) is a counter which increases with each visit of i to j. Here we took = 0.25 and rij(t) = 0.25 if buyer i visits seller j at time t and = 0 otherwise.

In the spirit of this approach, nothing was built into the rules of the sellers to make them privilege loyal buyers. We wanted to see whether this sort of behaviour would emerge. The sort of rules they had were of the form:

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