Explaining Market Price Discovery as an Algorithmic Process

Speaker: Prof. Richard Cole, New York University
Host: Prof. David KempeAbstract:
Self-organizing behavior can often be characterized in terms of a distributed process. It is natural to ask when and why it arises.One instance of such a distributed process is pricing in markets. A basic tenet of well-functioning markets is that they discover (converge toward) prices that simultaneously balance supplies and demands of all goods; these are called equilibrium prices. Further, the markets are self-stabilizing, meaning that they converge toward new equilibria as conditions change. This talk will seek to explain why this might happen by taking an algorithmic approach.More specifically, we introduce the setting of Ongoing Markets (by contrast with the classic Fisher and Exchange markets). An Ongoing Market allows trade at non-equilibrium prices, and, as its name suggests, continues over time. The main task remaining is to specify and analyze a price update rule. We consider a (tatonnement-style) rule with the following characteristics:1. The procedure is distributed: (i) the price updates for each good are independent, and (ii) the update for each good uses only limited "local" information. 2. It is asynchronous: price updates do not have to be simultaneous. 3. It is simple.And for appropriate markets the rule enables:4. Fast convergence. 5. Robustness in the face of (somewhat) inaccurate data.This talk is intended for a general (Computer Science) audience; it is based on joint works with Lisa Fleischer and Ashish Rastogi.Biography:
Richard Cole is a professor of Computer Science in the Courant Institute at NYU, where he has been on the faculty since receiving his Ph.D. in 1982. His Ph.D. was from Cornell, supervised by John Hopcroft. He served as department chair from 1994-2000. He was a fellow of the Guggenheim Foundation in 1988-89, and was named an ACM Fellow in 1998. He is the author or coauthor of over 100 papers. Highlights include the Parallel Merge Sort algorithm, the proof of the Dynamic Finger Conjecture for Splay Trees, and a tight analysis of the Boyer-Moore string matching algorithm.

Location: Seaver Science Library (SSL) - 150

Audiences: Everyone Is Invited

Contact: CS Colloquia