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| Format: | Preprint |
| Published: |
2026
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2605.18756 |
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| _version_ | 1866914589839458304 |
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| author | Farr, Robert S. |
| author_facet | Farr, Robert S. |
| contents | We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such actors are then simulated interacting through market rules which create a double auction for each of the goods. This framework captures the self-consistent, rational behavior of independent actors, including how they make compromises between purchases of different goods; so goes beyond price-demand curves, and also generates the small-scale fluctuations from individual trades. We find that stable price formation requires a model that includes time-preference for the actors. Fluctuations in prices show a distribution with algebraic tails. Including inflation expectations leads to complex, damped or un-damped price oscillations. We attempt to model the dynamics of input-output economic models, but find it difficult to keep prices stable with the assumptions employed. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_18756 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Ab initio simulation of market dynamics Farr, Robert S. Physics and Society We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such actors are then simulated interacting through market rules which create a double auction for each of the goods. This framework captures the self-consistent, rational behavior of independent actors, including how they make compromises between purchases of different goods; so goes beyond price-demand curves, and also generates the small-scale fluctuations from individual trades. We find that stable price formation requires a model that includes time-preference for the actors. Fluctuations in prices show a distribution with algebraic tails. Including inflation expectations leads to complex, damped or un-damped price oscillations. We attempt to model the dynamics of input-output economic models, but find it difficult to keep prices stable with the assumptions employed. |
| title | Ab initio simulation of market dynamics |
| topic | Physics and Society |
| url | https://arxiv.org/abs/2605.18756 |