Fragmentation in trader preferences among multiple markets: market coexistence versus single market dominance

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dc.citation.issue8
dc.citation.rankM22
dc.citation.spage202233
dc.citation.volume8
dc.contributor.authorNicole, Robin
dc.contributor.authorAlorić, Aleksandra
dc.contributor.authorSollich, Peter
dc.date.accessioned2024-06-13T13:29:20Z
dc.date.available2024-06-13T13:29:20Z
dc.date.issued2021-08-18
dc.description.abstractTechnological advancement has led to an increase in the number and type of trading venues and a diversification of goods traded. These changes have re-emphasized the importance of understanding the effects of market competition: does proliferation of trading venues and increased competition lead to dominance of a single market or coexistence of multiple markets? In this paper, we address these questions in a stylized model of zero-intelligence traders who make repeated decisions at which of three available markets to trade. We analyse the model numerically and analytically and find that the traders’ decision parameters—memory length and how strongly decisions are based on past success—make the key difference between consolidated and fragmented steady states of the population of traders. All three markets coexist with equal shares of traders only when either learning is too weak and traders choose randomly, or when markets are identical. In the latter case, the population of traders fragments across the markets. With different markets, we note that market dominance is the more typical scenario. Overall we show that, contrary to previous research emphasizing the role of traders’ heterogeneity, market coexistence can emerge simply as a consequence of co-adaptation of an initially homogeneous population of traders.
dc.identifier.doi10.1098/rsos.202233
dc.identifier.issn2054-5703
dc.identifier.scopus2-s2.0-85114652889
dc.identifier.urihttps://pub.ipb.ac.rs/handle/123456789/90
dc.identifier.wos000687528500001
dc.language.isoen
dc.publisherRoyal Society Publishing
dc.relation.ispartofRoyal Society Open Science
dc.relation.ispartofabbrR. Soc. Open Sci.
dc.rightsopenAccess
dc.titleFragmentation in trader preferences among multiple markets: market coexistence versus single market dominance
dc.typeArticle
dc.type.versionpublishedVersion
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