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No need for conspiracy: Self-organized cartel formation in a modified trust game

Tiago P. Peixoto, Stefan Bornholdt

2012 · arXiv

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From the abstract

We investigate the dynamics of a trust game on a mixed population where individuals with the role of buyers are forced to play against a predetermined number of sellers, whom they choose dynamically. Agents with the role of sellers are also allowed to adapt the level of value for money of their products, based on payoff. The dynamics undergoes a transition at a specific value of the strategy update rate, above which an emergent cartel organization is observed, where sellers have similar values of below optimal value for money. This cartel organization is not due to an explicit collusion among agents; instead it arises spontaneously from the maximization of the individual payoffs. This dynamics is marked by large fluctuations and a high degree of unpredictability for most of the parameter space, and serves as a plausible qualitative explanation for observed elevated levels and fluctuations of certain commodity prices.

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9 selected excerpts · 9 total mentions

EGreg
Neutral mention · rule
Pump = buy a lot of something so the price goes up. Let's say $2 billion of it <wait for more people to buy it as a result of the price movement, and news, etc.> Dump = sell at the higher prices and match the increased demand This is whats being advocated by market analysts, and it would be considered "fine": https://www.benzinga.com/analyst-ratings/analyst-color/21/03... If companies don't collude but do it in a sequence, then when does it become ok? As a different example, in 2014 employees alleged that Silicon Valley companies colluded to depress their wages, by acting like a cartel: https://equitablegrowth.org/aftermath-wage-collusion-silicon... But cartels can form without having to collude, merely by people acting in concert on a meme or belief (like HODL or SQUEEZE THE SQUOZE) and this seems fine! https://arxiv.org/abs/1201.3798
Original comment U.S. says John McAfee indicted over fraudulent cryptocurrency schemes
jsprogrammer
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Things get bad even before extractors enter the picture [0]; just a disadvantage in strategy update rate will result in the formation of cartel structures. The economy will function as long as there are sufficient physical resources and human will. Finance cannot kill it. [0] https://arxiv.org/abs/1201.3798
Original comment Finance is Not the Economy
eternalban
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I agree with your general critique, but these guys have a structural problem in their model: Their description of their model[1]: Our model is defined as follows. We consider a population of N agents, where each agent has two simultaneous roles: donator (e.g. a buyer) and rewarder (e.g. a seller). This simply does not correspond to the reality: we have locally interacting agents (gas-station owner, vehicle owner) that exist in a (relatively) 'flat'/'simultaneous' information space (e.g. the news of troubles in oil region x) and the fact that one set of agents (e.g. gas-station owners) are themselves engaged in affinity based relationship[s] with global agents (e.g.…
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oil companies). "No need for conspiracy: Self-organized cartel formation in a modified trust game" -- sure, in a purely locally bounded space of action and information. But that is not the reality of life on this planet. (Not for the past 200 years, for sure.) [1]: http://arxiv.org/pdf/1201.3798v1.pdf
Original comment Cartels Are an Emergent Phenomenon, Say Complexity Theorists
EGreg
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I am currently talking with Warren Mosler about implementing Unconditional Basic Income in local communities (Hi @sama! :) Cartels is the main danger with unconditional basic income. If you make sure everyone can eat, you create a moral hazard, where the insured are not sensitive to price anymore. Having said that, we already have means-tested welfare and food stamps, and cartels of fruit stores don't spontaneously appear everywhere. However, they may appear in food deserts and other places where there aren't a lot of participants. Competition is the only factor I can think of to combat this. But in some areas with few participants, this collusion can ultimately happen. And then of course there is this result: https://www.arxiv.org/abs/1201.3798v2 Does anyone here have constructive thoughts on how to overcome this problem? Price controls and collective bargaining via single payer is all I can think of besides competition.
Original comment Uber drivers gang up to cause surge pricing, research says
jsprogrammer
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Be sure to check out a similar simulation, "No need for conspiracy: Self-organizined cartel formation in a modified trust game" (0). (0) http://arxiv.org/pdf/1201.3798v3
Original comment Economics Simulation
jsprogrammer
Neutral mention · rule
Pretty close to what was found here: http://arxiv.org/abs/1201.3798 It also sounds fairly intuitive when you verbalize it: the faster you can update your (presumably sound) strategy to new information, the "better" you are likely to do compared to someone who responds to changing information at a slower rate.
Original comment Airbnb, My $1B Lesson
jsprogrammer
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Ok, well now we've gone from two ill-defined terms to a handful of ill-defined terms: "economic market or system", "prices based on competition", "private businesses", "control", "government", "market economy", "supply and demand", "little". I don't think these definitions are that rigorous or well-founded, however I will accept that they represent a colloquial understanding of the terms however "incorrect" they may be. I say "incorrect" because I'm not sure you could use those definitions to point to real-life instances of what my understanding (and what I believe is implied in this thread/forum) of a "free market" is: Entities exchanging *things*, free of…
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coercion. >you should have no problem rebutting my position Ok, so you've already signaled defeat... > that a free market does not require equal distribution of resources among participants To be clear, I never claimed that it does. I claimed that free markets don't really exist. It is actually very easy to disprove my claim, it merely requires one to produce a counter-example, that is, point to an instance of a free market. If you can provide a counter-example, I will respond, as I believe I will be able to show you a market that is (likely) rife with coercion. What I claimed is that existing markets are typically extremely asymmetrical in regard to how information and resources are distributed among the participants. Most participants in the "free market" that is the USA have comparatively no information or resources vs. the largest participants. Additionally, many of those who lack information and/or resources are survivally dependent in some way on the largest participants which is typically where the coercion is allowed (or designed) to creep in. Some research[1] has found that even seemingly small amounts of asymmetry lead to large systemic effects. In the cited case, it was found that those who update their market strategy (who to bid against and at what price) fastest will cyclically be able to achieve much higher values of money than those who update their strategies at a slower rate. When you map these results to their real-world analogues, it is established participants (corporations) that are able to update their strategies faster (analytics, espionage, acquisitions & mergers, political purchasing) while individuals are unable to update as quickly. For example, I can't really negotiate with and/or continually swap between competitors of: PG&E/AT&T/NBCComcastUniversal/TimeWarner/Verizon/etc/etc. To some extent I can swap (update my strategy), but not at the same rate that they are able to update theirs (for example, an airline can change prices on demand, multiple times per day). Typically I can't even access historical market pricing, while the incumbents have access to (and exploit) almost all historical market data. [1] http://arxiv.org/pdf/1201.3798v3.pdf Edit: If you are going to down-vote, please provide a counter-example.
Original comment The Billion Dollar Startup Club
EGreg
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Well let's take this context of married women for example. The reality is that there are many men who do not have any qualms about "trying to seduce" a married woman. http://www.youtube.com/watch?v=FKfMqwSMI4U (I just had to link this :-) These men do not "respect" the institution of marriage or the religious views on adultery etc. There are entire forums on the internet devoted to "how to get a girl in a relationship" with "boyfriend destroyer routines" or whatever. The idea is that an institution employing experts with lots of experience in poaching employees, is going to have an unequal advantage over the employee, and is likely to entice them either through souring…
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their relationship with their current employer (maybe telling an employee about how Apple's workers are treated in China, for example) as well as using psychological tricks to lure them away. Flirting is one thing. Blatantly propositioning in front of the husband when he's ware of it is something else. Most people draw a line not because they want to flaunt some antitrust law, but because of biological / economic emergent actions. http://arxiv.org/abs/1201.3798
Original comment How are cold-calling ceasefires illegal?

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