Probabilistic Theory of Stock Exchanges - страница 36

Fig. 1.4. Diagram of functions S&D, reflecting the dynamics of the classical two-agent market economy in the coordinate system [T, S & D] in the first time interval [t_>1,t_>1^>E].

Further, similarly to classical mechanics, we can consider prices and quantities of market agents as trajectories of market agents in two-dimensional economic space using the coordinate system [P, Q] as shown in Fig. 1.5. Let us clarify that time t in this parametric representation of functions S&D is an implicit parameter. Generally, this parametric representation gives nothing new compared to Figs. 1.3 and 1.4. Nevertheless, there is one interesting nuance here – the similarity of this diagram with the traditional picture in the neoclassical S&D model, namely the Marshall cross. We will touch on this issue a little later, but for now let's look at some of the features in Fig. 1.5. First, as the arrows show, the buyer and the seller move toward each other in terms of price: the seller lowers it, and the buyer, on the contrary, raises it. Thus the figure reflects normal market negotiation processes. Second, usually during negotiations, quantity quotations are reduced by both agents, i.e. both the buyer and the seller.

Fig. 1.5. Dynamics of the classical two-agent market economy in the two-dimensional economic space of price-quantity in the first time interval [t_>1,t_>1^>E].

Clearly, all agents want to buy or sell less goods at a compromise market price than at the desired prices they stated at the beginning of the trade. These factors together determine that the slope of the demand curve q^>D(p^>D) is negative and the slope of the supply curve q^>S(p^>S) is positive, just as the S&D functions in the neoclassical model «should» be. But this visual similarity is incomplete, because the economic meaning of these pictures in the two theories differs significantly: in the classical model it is a description of the actual process of negotiations in order to reach a deal, and in the neoclassical model it is a description of strategies of behavior of agents in the market in terms of neoclassical supply and demand curves, q^>D(p^>D) and q^>S(p^>S). We emphasize that while in neoclassics these curves, by definition, represent as it were the actual functions of supply and demand, in classics these curves are simply a graphical representation of the price and quantitative time trajectories in the form of one trajectory in the course of trading. Thus, the classic economic theory does not assume the existence of any definite dependence of the agents’ quantitative quotations on price quotations, i.e. the existence of any definite functions