A Behavioural Learning Approach to the Dynamics of Prices.

The paper studies the dynamics of market prices under the assumption of behavioural learning by sellers and buyers. The buyers are assumed to be price takers who learn about choosing sellers and acceptable prices, whilst the sellers have the possibility to offer a fixed price or to make successive reductions and learn about adequate selling behaviour and adequate price levels. The learning process was simulated and compared to the game theoretic prediction under the assumption of rational agents. The main areas of interest of the analysis concern the questions of whether bargaining on prices becomes common and whether the dynamics of prices converges. Copyright 2002 by Kluwer Academic Publishers