Crowd effects and volatility in markets with competing agents

We present analytic and numerical results for two models, namely the minori ty model and the bar-attendance model, which offer simple paradigms for a c ompetitive marketplace. Both models feature heterogeneous agents with bound ed rationality who act using inductive reasoning. We find that the effects of crowding are crucial to the understanding of the macroscopic fluctuation s, or 'volatility', in the resulting dynamics of these systems. (C) 1999 Pu blished by Elsevier Science B.V. All rights reserved.