Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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7/7/04
The Purpose of the Market by Julian Rowberry,
Maths and Computer Science Student

I once read that ' the purpose of bureaucracy is survival '. Recently I had the thought that perhaps the purpose of a market might not be to facilitate trade. But much like bureaucracies, life and memes, perhaps the markets purpose is survival?

If this were true, how would a market go about increasing its chances of survival?

Among other things, I (I am now a market) think I'd like to do some good volume. And I'd like to keep doing this volume. So I think I would like to reward people who do regular volume and help my survival. So I now have allies.

I also read somewhere that slot machines these days are programmed to provide more 'almost jackpots' in an effective move to increase volume. i.e. more 2 cherries and a banana, then a cherry, banana and a watermelon.

If I were running a lottery and could work around some rules, perhaps I could make more money if I drew (chose) numbers that are less common so that the winnings jackpotted, thus giving greater prizes, encouraging increasing volume. I could also pick numbers close to popular numbers.

So if I'm a market, my allies and I might be able to increase volume by having flat periods followed by ever increasing jackpots (big moves). Or, well, at least the appearance of them. These moves would also support my allies and I better if they were in directions that encouraged more participation from non allies.