Self-Organization of Trade Networks in an
Economy with Imperfect Infrastructure

Sergei Guriev, Igor Pospelov and Margarita Shakhova

A multiagent model is proposed for analysis of self-organization of trade networks in a transition economy. It is shown that while in the case of almost perfect infrastructure the system quickly converges to a near-competitive equilibrium, more imperfect infrastructure results in significant oscillations of prices and of the structure of the trade networks, bursts of shortages and longer chains of traders; the system may converge to multiple equilibria including the suboptimal ones. Emergence of trader's market strategies such as stabilizing wholesale traders and destabilizing speculators is discovered. The model is studied both analytically and via computer simulations.

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