Spontaneous Segregation of Agents Across Double Auction Markets

TL;DR

This paper explores how traders spontaneously segregate into groups across multiple markets due to decision biases, even when traders are homogeneous, revealing phase transition-like behavior influenced by a temperature parameter.

Contribution

It demonstrates the emergence of spontaneous segregation in a simple market model with homogeneous traders, highlighting the role of a temperature parameter in phase transition behavior.

Findings

Segregation occurs below a critical temperature T_c.

Persistence times of traders' market loyalty increase below T_c.

Homogeneous traders can self-organize into segregated groups.

Abstract

In this paper we investigate the possibility of spontaneous segregation into groups of traders that have to choose among several markets. Even in the simplest case of two markets and Zero Intelligence traders, we are able to observe segregation effects below a critical value Tc of the temperature T; the latter regulates how strongly traders bias their decisions towards choices with large accumulated scores. It is notable that segregation occurs even though the traders are statistically homogeneous. Traders can in principle change their loyalty to a market, but the relevant persistence times become long below Tc.