On the interplay between fluctuations and efficiency in a model economy with heterogeneous adaptive consumers

TL;DR

This paper analyzes a model economy with adaptive consumers, revealing a transition from inefficient to efficient states as consumer number grows, while also highlighting increased price fluctuations in the efficient phase.

Contribution

It introduces a dynamical mean-field theory approach to study stationary states in a heterogeneous adaptive consumer economy, identifying a phase transition and fluctuation behavior.

Findings

Transition from inefficient to efficient state with increasing consumers

Price fluctuations are larger in the efficient regime

Dynamical mean-field theory matches computer simulations

Abstract

We discuss the stationary states of a model economy in which $N$ heterogeneous adaptive consumers purchase commodity bundles repeatedly from $P$ sellers. The system undergoes a transition from an inefficient to an efficient state as the number of consumers increases. In the latter phase, however, price fluctuations may be much larger than in the inefficient regime. Results from dynamical mean-field theory obtained for $N\to\infty$ compare fairly well with computer simulations.