Bubble burst as jamming phase transition

TL;DR

This paper models the bursting of economic bubbles by drawing parallels with traffic jam formation, emphasizing the role of transaction volume as a key factor in bubble collapse.

Contribution

It introduces a novel bubble burst model that incorporates transaction volume and traffic dynamics, offering a new perspective on bubble collapse mechanisms.

Findings

Bubble burst shares properties with traffic jam formation

Transaction volume is a driving force of bubble bursting

Model aligns with US housing market data

Abstract

Recently research on bubble and its burst attract much interest of researchers in various field such as economics and physics. Economists have been regarding bubble as a disorder in prices. However, this research strategy has overlooked an importance of the volume of transactions. In this paper, we have proposed a bubble burst model by focusing the transactions incorporating a traffic model that represents spontaneous traffic jam. We find that the phenomenon of bubble burst shares many similar properties with traffic jam formation by comparing data taken from US housing market. Our result suggests that the transaction could be a driving force of bursting phenomenon.