How market structure drives commodity prices

Bin Li, K. Y. Michael Wong*, Amos H.M. Chan, Tsz Yan So, Hermanni Heimonen, Junyi Wei, David Saad

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review


    We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own resource level and a couple of macroscopic parameters that emerge naturally from the analysis, akin to mean-field parameters in statistical mechanics. When resources are scarce prices rise sharply below a turning point that marks the disappearance of excess producers. To compare the model with real empirical data, we study the relationship between commodity prices and stock-to-use ratios in a range of commodities such as agricultural products and metals. By introducing an elasticity parameter to mitigate noise and long-term changes in commodities data, we confirm the trend of rising prices, provide evidence for turning points, and indicate yield points for less essential commodities.

    Original languageEnglish
    Article number113405
    JournalJournal of Statistical Mechanics: Theory and Experiment
    Issue number11
    Early online date29 Nov 2017
    Publication statusPublished - 29 Nov 2017

    Bibliographical note

    This is an author-created, un-copyedited version of an article accepted for publication/published in Journal of Statistical Mechanics: Theory and Experiment. IOP Publishing Ltd is not responsible for any errors or omissions in this version of the manuscript or any version derived from it. The Version of Record is available online at 10.1088/1742-5468/aa933a.

    Funding: Research Grants Council of Hong Kong (grant numbers 604512, 605813 and 16322616) and the Leverhulme Trust RPG-2013-48.


    • agent-based models
    • graphical games
    • models of financial markets
    • socio-economic networks


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