Intertemporal Competitive Equilibrium : A Computational Model of Intermediacy in Speculative Markets

Simultaneous research efforts made in 1962 by Gary Becker and Vernon Smith proved that neither rationality nor complete information are necessary market conditions to reach a competitive equilibrium. Although behavioral extensions to this framework have shown significant progress towards a coherent model of competitive price formation, economics continues to lack a generally valid model of decentralized price formation. I present a multilateral exchange model with individual adaptive learning and intermediation in speculative markets. Findings made show that boundedly rational intermediaries are able to reach competitive intertemporal outcomes without perfect foreknowledge of a market with acyclical random shifts in supply and demand. In other words, neither rationality nor complete information are necessary conditions to reach intertemporal allocative efficiency in a speculative market