Co-learning patterns as emergent market phenomena: An electricity market illustration

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Date
2012-01-01
Authors
Li, Hongyan
Tesfatsion, Leigh
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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Abstract

The definition of emergence remains problematic, particularly for systems with purposeful human interactions. This study explores the practical import of this concept within a specific market context: namely, a double-auction market for wholesale electric power that operates over a transmission grid with spatially located buyers and sellers. Each profit-seeking seller is a learning agent that attempts to adjust its daily supply offers to its best advantage. The sellers are co-learners in the sense that their supply offer adjustments are in response to past market outcomes that reflect the past supply offer choices of all sellers. Attention is focused on the emergence of co-learning patterns, that is, global market patterns that arise and persist over time as a result of seller co-learning. Examples of co-learning patterns include correlated seller supply offer behaviors and correlated seller net earnings outcomes. Heat maps are used to display and interpret co-learning pattern findings. One key finding is that co-learning strongly matters in this auction market environment. Sellers that behave as Gode-Sunder budget-constrained zero-intelligence agents, randomly selecting their supply offers subject only to a break-even constraint, tend to realize substantially lower net earnings than sellers that tacitly co-learn to correlate their supply offers for market power advantages.

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This is a working paper of an article published in Journal of Economic Behavior and Organization, Vol. 82 no. 2-3 (May 2012): 395-419.

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