Information Technology Reference
In-Depth Information
a better valuation of the commodity being traded. By making a simple modification to
the ZIP trading algorithm to take account of this observation, improved performance
was demonstrated for all but the most well-connected individuals.
In a more general sense, these results show that if it is possible to estimate the quality
of a trader's knowledge, it may be beneficial to factor this information into the way in
which the trading agent learns. This result isn't necessarily restricted to trading agents.
In general, in any market with incomplete information flow, it may be beneficial to
pay more attention to the most significant players within the market. However, care is
necessary. Currently the ZIP trading strategy does not allow the more well-connected
agents to exploit their informational advantage. However, this could be changed fairly
easily. It is not difficult to imagine methods that allow simple trading agents to exploit
informational advantages in order to make profit. It is, however, difficult to imagine
ways in which to modify trading strategies in order to prevent this occurring in network
based markets. The only solution to this problem may be to design market systems
which minimise informational asymmetries. This may require research into more so-
phisticated market mechanisms to replace the continuous double auction. Alternatively,
it may require the addition of completely new processes to the market. For instance, a
process analogous to the financial press may allow agents to regularly gain an overview
of the behaviour of the entire market.
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