Date of Award
Doctor of Philosophy
This thesis consists of three evolutionary models examining market behavior.;Profit maximization is the usual prerequisite for achievement of competition. However, for a long time it has been thought that this principle of profit maximization can be replaced by natural selection. In an evolutionary model of an industry, where firms' outputs are chosen randomly, where entry occurs with no motivation and where exit occurs when a firm's wealth becomes negative, the first paper shows that the industry converges in probability to a perfectly competitive equilibrium as firms get infinitesimally small relative to the market, as the entry fixed costs get sufficiently small and as time gets sufficiently large.;The second paper shows that informational efficiency can be achieved in the long run when all speculators are irrational noise traders. Speculators are assumed to be unsophisticated and merely act upon their predetermined trading types (buyer, seller, or both), their predetermined fractions of wealth allocated for speculation and their inherent abilities to predict the spot price, reflected in their distributions of prediction errors with respect to the spot price. In a dynamic model of a futures market, speculators with a continuous spectrum of all possible predictive abilities are followed through time. With continuous entry of such speculators into the economy the market redistributes wealth among speculators. This paper shows that the futures price converges in probability to the spot price.;The third paper uses an evolutionary approach to explain the origin of money as a medium of exchange in a primitive economy, where agents specialize in production for the purpose of trading for their own consumption goods. Agents meet randomly in pairs and trade bilaterally. All agents are assumed to begin with arbitrary trading strategies. A general class of dynamics, which is consistent with Darwinian dynamics, is applied to the selection of strategies. This paper finds that which commodities serve as media of exchange depends on the relative intrinsic values among all commodities, the proportions of agents specializing in different production consumption activities and the agents' initial trading strategies. In addition, this paper shows that this class of dynamics only selects for the locally optimal equilibrium and it does not necessarily select for a global optimum.
Luo, Guo Ying, "Evolutionary Models Of Market Behavior" (1995). Digitized Theses. 2527.