A Behavioural Learning Approach to the Dynamics of Prices

The paper studies the dynamics of market prices under theassumption of behavioural learning by sellers and buyers. Thebuyers are assumed to be price takers who learn about choosingsellers and acceptable prices, whilst the sellers have thepossibility to offer a fixed price or to make successivereductions and learn about adequate selling behaviour andadequate price levels. The learning process was simulated andcompared to the game theoretic prediction under the assumptionof rational agents. The main areas of interest of the analysisconcern the questions of whether bargaining on prices becomescommon and whether the dynamics of prices converges. © 2002 Kluwer Academic Publishers.