The dynamics of interacting markets. First results.

Brian Sallans, Georg Dorffner, Alexandros Karatzoglou

Publication: Working/Discussion PaperWU Working Paper

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Abstract

The behavior of boundedly rational agents in two interacting markets is investigated. A discrete-time model of coupled financial and consumer markets is described. The integrated model is then used to investigate feedback effects between the coupled markets. In particular, the influence of the financial market on product development is demonstrated. The types of traders present in the financial market is shown to have a large effect on firm behavior and product development. In a financial market where traders favour particular products the firms are shown to develop these favored products instead of more profitable ones. The effect is quite strong despite the only feedback being through a noisy stock price, and despite the fact that only a third of share traders are directly influenced by product position. (author's abstract)
Original languageEnglish
Place of PublicationVienna
PublisherSFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business
Publication statusPublished - 2002

Publication series

NameWorking Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"
No.83

WU Working Paper Series

  • Working Papers SFB \Adaptive Information Systems and Modelling in Economics and Management Science\

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