Possible Presence of Intermediary and Trader's Information

Abstract

In this paper, we investigate the possible presence of a monopolistic intermediary who buys at a lower buying price and sells at a higher selling price. We extend Gehrig's(1993) game-theoretic model of competition between an intermediary and a decentralized matching market. In Gehrig's(1993) model, buyers and sellers have powerful information about aggregate demand and supply. In our agent-based model, traders are reinforcement learning agents and are kept informed for learning, but cannot know aggregate supply and demand. The simulation result responds to trader's information. (1) When traders are provided adequate information for learning, the result is regular oscillation and the center is the theoretical figure by Gehrig(1993). (2) When traders are provided restricted information for learning, the result is irregular oscillation and the figure is lower than the theoretical figure by Gehrig(1993).