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Felix Patzelt & Klaus Pawelzik (2013).
An Inherent Instability of Efficient Markets. Scientific Reports. 3 (2784)
A minimal trading model is introduced which solves the paradox of market efficiency and extreme price jumps. The redistribution of points in the seesaw game is a direct simplification of the trading dynamics in this model. However, the seesaw shows the most recent price. In the model, traders act on complex patterns of previous price changes.
Press release at (free, german)
Publication at (free, english)

Felix Patzelt & Klaus Pawelzik (2013).
Bubbles, Jumps, and Scaling from Properly Anticipated Prices.
We show in a minimalistic model of speculation how price efficiency can lead to bubbles, and to realistic distributions of extreme price fluctuations. Furthermore, players in a simplified seesaw game are shown to act as predicted by our theory.
Proceedings (book chapter) at (charged, englisch)
Preprint at (free, english)

Felix Patzelt (2014).
Instability and Information.
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that adapt to information. Surprising connections are found between two apparently unrelated research topics: hand-eye coordination in balancing tasks and speculative trading in financial markets. Seemingly paradoxically, locally minimising fluctuations can increase a dynamical system's sensitivity to unpredictable perturbations and thereby facilitate global catastrophes. This general principle is studied in several domain-specific models and in behavioural experiments. It explains many findings in both fields and resolves an apparent antinomy: the coexistence of stabilising control or market efficiency and perpetual instabilities resembling critical phenomena in physical systems.
This Dissertation was awarded the Bremer Studienpreis 2015. Two chapters are dedicated to The Seesaw Game.
Preprint at (free, englisch)