Dynamics of price formation on complex networks
Andrea Civilini1,2, Vito Latora1,2,3
1School of Mathematical Sciences, Queen Mary University of London, London E1 4NS, United Kingdom.
PNAS Nexus
|February 3, 2025
Summary
This study introduces a network-based economic model for price formation. It reveals how market structure and buyer information influence price dynamics and competition strength.
Area of Science:
- Economics
- Network Science
- Computational Social Science
Background:
- Economic models traditionally ignore market network structures.
- Real-world markets involve complex spatial and abstract networks.
Purpose of the Study:
- To develop a dynamical model of price formation on complex networks.
- To analyze how network topology and buyer information affect market dynamics.
- To quantify competition strength and identify optimal seller locations.
Main Methods:
- A dynamical model with buyers as random walkers and sellers adjusting prices.
- Simulation of price formation on networks with varying topologies and buyer information levels.
- Development of a novel node centrality measure based on seller payoff.
Main Results:
- Model exhibits convergence to fixed prices or price cycles based on network structure and buyer information.
- Demonstrates how market structure dynamically influences competition.
- Identifies profitable seller locations using urban street network data.
Conclusions:
- Network structure is crucial for understanding price formation and market competition.
- The model provides a framework for quantifying competition and optimizing seller placement.
- Novel centrality measure offers insights into economic node importance.
More Related Videos
00:07Quantification of Protein Interaction Network Dynamics using Multiplexed Co-Immunoprecipitation
Published on: August 21, 2019
8.3K
08:36Dynamic Inter-subject Functional Connectivity Reveals Moment-to-Moment Brain Network Configurations Driven by Continuous or Communication Paradigms
Published on: March 21, 2019
7.2K
Related Concept Videos
02:20Dynamic Equilibrium
50.1K
A reversible chemical reaction represents a chemical process that proceeds in both forward (left to right) and reverse (right to left) directions. When the rates of the forward and reverse reactions are equal, the concentrations of the reactant and product species remain constant over time and the system is at equilibrium. A special double arrow is used to emphasize the reversible nature of the reaction. The relative concentrations of reactants and products in equilibrium systems vary greatly;...
50.1K
01:23Complexation Equilibria: Overview
603
Complexation reactions take place when dative or coordinate covalent bonds form between metal ions and ligands. The compounds formed in these reactions are called coordination compounds. The number of bonds formed between the metal ion and the ligands is called its coordination number. Generally, most metal ions in an aqueous solution are solvated by water molecules and thus exist as aqua complexes.
The equilibrium constant of the complexation reaction is represented as the formation constant...
The equilibrium constant of the complexation reaction is represented as the formation constant...
603
01:09Complexation Equilibria: Factors Influencing Stability of Complexes
319
In complexation reactions, metal cations are the electron pair acceptors, and the ligands are the electron pair donors. The stability of the metal complexes depends primarily on the complexing ability of the central metal ion and the nature of the ligands. Generally, the complexing ability of the metal ion depends on the size and charge of the ion. As the metal ion size increases, the stability of the metal complexes decreases, provided that the valency of the metal ion and the ligands remain...
319
01:23Stability of Equilibrium Configuration
427
Understanding the stability of equilibrium configurations is a fundamental part of mechanical engineering. In any system, there are three distinct types of equilibrium: stable, neutral, and unstable.
A stable equilibrium occurs when a system tends to return to its original position when given a small displacement, and the potential energy is at its minimum. An example of a stable equilibrium is when a cantilever beam is fixed at one end and a weight is attached to the other end. If the weight...
A stable equilibrium occurs when a system tends to return to its original position when given a small displacement, and the potential energy is at its minimum. An example of a stable equilibrium is when a cantilever beam is fixed at one end and a weight is attached to the other end. If the weight...
427
01:10Entropy Change in Reversible Processes
2.5K
In the Carnot engine, which achieves the maximum efficiency between two reservoirs of fixed temperatures, the total change in entropy is zero. The observation can be generalized by considering any reversible cyclic process consisting of many Carnot cycles. Thus, it can be stated that the total entropy change of any ideal reversible cycle is zero.
The statement can be further generalized to prove that entropy is a state function. Take a cyclic process between any two points on a p-V diagram.
The statement can be further generalized to prove that entropy is a state function. Take a cyclic process between any two points on a p-V diagram.
2.5K
03:45Formation of Complex Ions
23.2K
A type of Lewis acid-base chemistry involves the formation of a complex ion (or a coordination complex) comprising a central atom, typically a transition metal cation, surrounded by ions or molecules called ligands. These ligands can be neutral molecules like H2O or NH3, or ions such as CN− or OH−. Often, the ligands act as Lewis bases, donating a pair of electrons to the central atom. These types of Lewis acid-base reactions are examples of a broad subdiscipline called coordination...
23.2K