Couple of months ago I have started a series of posts on price formation in the free market or how and why the free market does (not) work.

In the first part of the series we have discussed economic laws of supply and demand. We have also mentioned the "sweet spot" of the supply-demand model - equilibrium price. But we did not cover how one would discover the equilibrium price.

What I did not notice previously, until revisiting the topic while writing this post, is that the supply and demand laws should be stated as areas and not curves. The simple logic is that if you sell, you are keen to sell at no lower than some price. You will be obviously happy to sell at higher price. Hence for the supplier any point on or above supply curve is desirable outcome. The same logic applies to the demand curve - buyers are happy to buy at some price or lower.

As long as you have data, you might pull something useful out of it. We see this in Steve Mould's talk from the Just for Graphs show. See the video below.

Here we will briefly present another classic agent-based model - Axelrod's model [1]. In his article Axelrod argues that culture is formed through social interactions, that it is "something people learn from each other". Hence he presents a model which describes competition between cultural traits via social interactions between the agents.

More than four years ago I (Aleksejus) started a series of posts reviewing with most well known kinetic exchange models. Recently I had to refresh my memory on this topic as a colleague (Julius) suggested an idea how to obtain power-law from the constant exchange model.

Last week Nobel prize laureate Robert Shiller delivered an open lecture at Life Sciences Center, Vilnius University. His talk involves some topics extremely relevant in the scope of Physics of Risk. Including the "epidemic" approach to economics and the importance of narration to humans as species.