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Markets are competitive if and only if P != NP

arxiv.org

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Re: Markets are competitive if and only if P != NP

#71

Post by stouset »

ladberg wrote: post #59
brunoborges wrote: post #52

It's time to forbid bots and HFT. Want to buy/sell a stock? Humans need to manually submit in the system.

Why? Don't you prefer getting better prices when you want to go buy a stock?

The argument is not that you get better prices, it’s that you get accurate prices.

First, this definition has always been circular: what’s the most accurate price? The one the market comes up with. More market, more accuracy!

Second, there is never any reconciliation of the costs society is saddled with in order to chase arbitrarily more accurate prices, the most obvious of which is the massive quantity of fat skimmed off by the financial services sector.

Third, as an index investor, I more or less couldn’t care less. This hyperfixation on accuracy only really matters to people who are actively trading, which is already a fool’s game.

Re: Markets are competitive if and only if P != NP

#72

Post by SoftTalker »

AaronAPU wrote: post #17
api wrote: post #9

If markets were perfectly efficient, entrepreneurship would not exist. An entrepreneur is, at this level, someone who looks for an arbitrage opportunity in correcting a market inefficiency, usually of the form "there is a market for X, X could be provided, but X is not currently provided."

That seems to stretch the meaning of market inefficiency. Is the lack of unlimited free energy an inefficiency in a market? Because an entrepreneur who achieves that is going to do pretty well. I’d say that would be creating value not optimizing market efficiency.

How would creating unlimited free energy allow an entrepreneur to do pretty well? It it's free, there's no money to be made.

Re: Markets are competitive if and only if P != NP

#73

Post by lstodd »

nok22kon wrote: post #44
narnarpapadaddy wrote: post #21

Earlier quoted context omitted.

Game theory here is applied to two fundamental market theorems. It’s a way to analyze the validity of those assumptions, rather than to build a new model. Empirical evidence to the contrary is expected given mutually inconsistent premises, which is what the author’s results predict. The author has simply used game theory math to disprove economist math.

where do nuclear weapons fit in? do they make markets more/less efficient/competitive?

Where do conventional weapons fit it?

Nuclear has been in maintenance mode for so long that there are doubts about if anyone could right now detonate one without shitting their pants on account if it would even go off.

Re: Markets are competitive if and only if P != NP

#74

Post by fluoridation »

ladberg wrote: post #65
fluoridation wrote: post #62

Earlier quoted context omitted.

I prefer a better price delta between buy and sell, which is blind to price hikes across the board.

That's exactly what "better prices" means...

If I get a better price when I buy then someone else gets a better price when they buy too. (S + k) - (B + k) = S - B.

Re: Markets are competitive if and only if P != NP

#75

Post by SoftTalker »

dpweb wrote: post #60
FailMore wrote: post #19

Would anyone mind explaining what P and NP are?

P and NP are classes of computational problems. A problem in P can be solved in polynomial time - the computation required grows relatively slowly as the input size increases. Like sorting a list of numbers. A problem in NP requires exponential time or greater, but a proposed solution can be verified quickly. For example, checking a completed Sudoku puzzle. It is believed but unproven that all problems in NP are NOT…

I have never really understood this, from the time it was first introduced to me in my undergraduate education nearly 40 years ago. It seems to boil down to saying "all unsolvable problems are not in the set of solvable problems" which seems like a tautology. I don't get why "P != NP" is considered so profound.

I feel like I have not yet found the proper explanation. Or I'm just too dense to get it.

Re: Markets are competitive if and only if P != NP

#78

Post by apothegm »

madihaa wrote: post #76

the same author 14 years ago. Markets are Efficient if and Only if P = NP and now Markets are competitive if and only if P != NP https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1773169&...

Which would in turn imply that markets cannot be simultaneously efficient and competitive.

Re: Markets are competitive if and only if P != NP

#79

Post by d4ng »

MostlyStable wrote: post #12

I don't have the mathematical chops to really analyze this on my own. Is this a bigger deal than the fact that real world markets already violate all the theoretical assumptions (e.g. unimpeded access to new entrants, perfect information, etc.etc), and so, in practice are never perfectly competitive or efficient?

Defi does a pretty good job regarding unimpeded access in comparison to the more traditional venues. This isn’t just about getting money into the system, but also what instruments you have access to.

The term ‘perfect information’ is a bit of a mirage, and has been shown to be impossible in physics (uncertainty principle).

What really matters is information advantage: Does your inexact expected value function consistently beat others’ calculations in the market. Here, the true value - value really is just a word and is dependent on people - is irrelevant.

Re: Markets are competitive if and only if P != NP

#80

Post by pwdisswordfishq »

xxpor wrote: post #2

The actual paper's title is "Markets are competitive if and only if P != NP" Seems that HN's auto-headline rewriting in this case has made a critical error :) >Artificial intelligence, by expanding firms' computational capabilities, is pushing markets from the competitive regime toward the collusive regime, explaining the empirical emergence of algorithmic collusion without explicit coordination. I have to dig more i…

The actual paper’s title is

“Markets are competitive if and only if P ≠ NP”

It’s 2026, people, you don't have to use crude ASCII approximations of mathematical symbols any more.

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