Hello,

We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Emerging Technology from the arXiv

A View from Emerging Technology from the arXiv

Best of 2012: Cartels Are an Emergent Phenomenon, Say Complexity Theorists

In January, theorist revealed that under certain market conditions, cartels arise naturally without collusion.

  • December 29, 2012

“The price of gas is a puzzle. Monitor the average price in gas stations in a particular city and it will vary dramatically, sometimes in a matter of hours and often in ways that appear cyclical. 

Economist have long scratched their heads over this kind of pattern. One explanation is that this behaviour emerges when two competing companies change their pricing strategy at each stage by reacting to the other. The resulting behaviours are known as Edgeworth Price Cycles.

The problem is that gas station prices are not controlled by two competing players but many competing retailers. It’s easy to assume that the many-body problem produces similar patterns but nobody has been able to show this. 

Until now. Today Tiago Peixoto and Stefan Bornholdt, physicists at the University of Bremen in Germany, show how a more complicated model with many buyers and sellers reproduces this kind of behaviour. 

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

Continued…

Cut off? Read unlimited articles today.

Become an Insider
Already an Insider? Log in.

Uh oh–you've read all of your free articles for this month.

Insider Premium
$179.95/yr US PRICE

Want more award-winning journalism? Subscribe to Insider Plus.
  • Insider Plus {! insider.prices.plus !}*

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus the digital magazine, extensive archive, ad-free web experience, and discounts to partner offerings and MIT Technology Review events.

    See details+

    What's Included

    Unlimited 24/7 access to MIT Technology Review’s website

    The Download: our daily newsletter of what's important in technology and innovation

    Bimonthly print magazine (6 issues per year)

    Bimonthly digital/PDF edition

    Access to the magazine PDF archive—thousands of articles going back to 1899 at your fingertips

    Special interest publications

    Discount to MIT Technology Review events

    Special discounts to select partner offerings

    Ad-free web experience

/
You've read all of your free articles this month. This is your last free article this month. You've read of free articles this month. or  for unlimited online access.