Modeling market mechanism with minority game

Using the minority game model we Study a broad spectrum of problems of mark et mechanism. We study the role of different types of agents: producers, sp eculators as well as noise traders. The central issue here is the informati on flow: producers feed in the information whereas speculators make it away . How well each agent fares in the common game depends on the market condit ions, as well as their sophistication. Sometimes there is much to gain with little effort, sometimes great effort virtually brings no more incremental gain. Market impact is also shown to play an important role, a strategy sh ould be judged when it is actually used in play for its quality. Though the minority game is an extremely simplified market model, it allows to ask, a nalyze and answer many questions which arise in real markets. (C) 2000 Else vier science B.V. All rights reserved.