Template-Type: ReDIF-Paper 1.0
Author-Name: Ketter, W.
Author-Name-Last: Ketter
Author-Name-First: Wolfgang
Author-Name: Collins, J.
Author-Name-Last: Collins
Author-Name-First: John
Author-Name: Gini, M.
Author-Name-Last: Gini
Author-Name-First: Maria
Author-Name: Gupta, A.
Author-Name-Last: Gupta
Author-Name-First: Alok
Author-Name: Schrater, P.
Author-Name-Last: Schrater
Author-Name-First: Paul
Title: Detecting and Forecasting Economic Regimes in Multi-Agent Automated Exchanges
Abstract: We show how an autonomous agent can use observable market conditions to characterize the microeconomic situation of the market and predict future market trends. The agent can use this information to make both tactical decisions, such as pricing, and strategic decisions, such as product mix and production planning. We develop methods to learn dominant market conditions, such as over-supply or scarcity, from historical data using Gaussian mixture models to construct price density functions. We discuss how this model can be combined with real-time observable information to identify the current dominant market condition and to forecast market changes over a planning horizon. We forecast market changes via both a Markov correction-prediction process and an exponential smoother. Empirical analysis shows that the exponential smoother yields more accurate predictions for the current and the next day (supporting tactical decisions), while the Markov correction-prediction process is better for longer term predictions (supporting strategic decisions). Our approach offers more flexibility than traditional regression based approaches, since it does not assume a fixed functional relationship between dependent and independent variables. We validate our methods by presenting experimental results in a case study, the Trading Agent Competition for Supply Chain Management.
Creation-Date: 2007-10-19
File-URL: https://repub.eur.nl/pub/10594/ERS-2007-065-LIS.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2007-065-LIS
Classification-JEL: C52, L15, M, O32
Keywords: Trading agents, dynamic pricing, machine learning, market forecasting
Handle: RePEc:ems:eureri:10594