Cartels Are an Emergent Phenomenon, Say Complexity Theorists

[GliderGuider]

This article is for everyone who is still wedded to the idea that the world's economic ills stemming from the consolidation of power and control are largely the result of greed and collusion. I've been saying for some time now that they're nothing of the sort. Instead, they are the natural, emergent qualities of a high-energy, complex system. Here's some support for that view.

Cartels Are an Emergent Phenomenon, Say Complexity Theorists

Peixoto and Bornholdt say that when condition are right, cartel-like behaviour emerges naturally without collusion between sellers.

Theirs is an agent-based model where all players are both buyers and sellers. The buying behaviour is determined by a value for many criteria. So players buy from a certain number of sellers but can change a seller at each step if they find one offering better value for money.

The results make interesting reading. It turns out that a crucial factor is the speed at which buyers and sellers react to the market. When buyers react quickest, sellers are forced to match the best possible value for money and prices tend to drop.

By contrast, when sellers react quickest, they are quick to copy others offering poor value for money. This reduces the number of sellers offering good value for money in a vicious cycle that drives prices as high as possible.

This is the emergence of a cartel and it happens in these guys’ model without any collusion between sellers. Instead, it is an emergent property of the market place that happens when the sellers outperform buyers in the way they react to market conditions.

[Demeter]

1. Right

Because GREED is the only thing that motivates a man, a government, a nation...

but only if one is greedy does that notion take root. And we've had ample teaching over thousands of years in other ways to organize our societies.

We must evolve out of Greed into a more ecologically-friendly species, or we will all die.

[GliderGuider]

3. Greed and fear are much more motivating than altruism and love

Greed and fear speak from the far older, less conscious, "reptilian" part of our brains. As a result they have more direct connections to our actions than recent, gentler emotions.

IMO, greed is a manifestation of our biological survival instinct. It becomes pathological in a particular kind of environment: an environment of actual surplus but perceived scarcity. This implies that greed can be subdued by bringing our perceptions into line with reality. Such a shift is far more accessible to individuals than social collectives.

[Demeter]

6. There IS Scarcity, BECAUSE there is Greed

A concerted effort to eliminate scarcity by redistributing the hoards will change everything.

[unblock]

2. very interesting. economists have long referred to gas prices as an implicit trust

certainly it's better to have a sophisticated model that exhibits this behavior.

[phantom power]

4. I would love emergent-behavior theories to start informing political policy

Of course, here in the real world some large fraction our politicians still believe in creationism. So I probably ought to set my sights lower.

[FBaggins]

5. There's no such thing as a cartel without collusion

I don't see anything new or unusual here. They're just describing normal market activity and labeling it as "cartel-like". Markets, after all, are "emergent phenomena" themselves.

If a given stock price jumps 5% to a resistance level, a large number of sellers may decide that that's a good price to sell at relative to their personal needs... the fact that their desire to sell at that price coincides with many others is in no sense "cartel-like".

It's as though they just took Adam Smith's "invisible hand" and rebranded it as "cartel-like".