Complexity Hints for Economic Policy pp 157-180 | Cite as

# Markov Nets and the NetLab Platform: Application to Continuous Double Auction

## Abstract

In describing dynamics of classical bodies one uses systems of differential equations (Newton laws). Increasing the number of interacting bodies requires finer time scales and heavier computations. Thus one often takes a statistical approach (e.g. Statistical Mechanics, Markov Chains, Monte Carlo Simulations) which sacrifices the details of the event-by-event causality. The main assumption is that each event is determined only by events immediately preceding it rather than events in the arbitrary past. Moreover, time is often divided in slices and the various cause and effect events are assumed to take place in accordance with this arbitrary slicing. The dynamics of certain economic systems can be expressed similarly. However, in many economic systems, the dynamics is dominated by specific events and specific reactions of the agents to those events. Thus, to keep the model meaningful, causality and in particular the correct ordering of events has to be preserved rigorously down to the lowest time scale.

## Keywords

Limit Order Effect Event Order Book Market Order Double Auction## Preview

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