Artificial economic life: a simple model of a stockmarket

We describe a model of a stockmarket in which independent adaptive agents can buy and sell stock on a central market. The overall market behavior, such as the stock price time series, is an emergent property of the agents ’ behavior. This approach to modelling a market is contrasted with conventional rational expectations approaches. Our model does not necessarily converge to an equilibrium, and can show bubbles, crashes, and continued high trading volume. 1. Approaches to economic theory In recent years the prevailing rational expecta-tions approach to economic theory has been chal-lenged from several quarters, and increasing in-terest has been shown in an alternative evolution-ary economics viewpoint. In this paper we de-scribe and contrast these paradigms, and discuss our artificial stockmarket model as an example of the evolutionary approach. Our approach i