Statistical Properties of a Subjective Value Exchange Model

Music City Center 

The exchange process of commodities is the essence of market dynamics. Features such as value, price, and satisfaction are commonly interpreted in the field of economics. However, this has also caught the attention of statistical physicists, who view the market as a statistical ensemble. Concepts borrowed from statistical mechanics, such as temperature or entropy, now appear in the understanding of market dynamics. In this context, we developed a microscopic model for the exchange of a basket of commodities. We consider that people value each commodity in an "individual and subjective" manner and eventually decide to exchange them in the market. We ran the model with a large number of agents acting as traders. We recorded all the trading actions and computed the statistical distribution of exchange ratios and the flux of commodities. These simulations allowed us to make a connection between price and the thermodynamic concept of temperature. The corresponding entropy of the system was also compared to that expected for a microscopic thermodynamic system.

exchange value

valuation

econophysics

entropy

temperature 

Section on Physical and Engineering Sciences