Date of Award
Summer 8-2026
Document Type
Thesis
Degree Name
Master of Science (MS)
Department
Computational and Data Sciences
First Advisor
Dr. Steven Gjerstad
Second Advisor
Dr. Gabriele Camera
Third Advisor
Dr. David Rojo Arjona
Abstract
The ‘law of one price’ is an appealing notion regarding pricing of tradeable commodities that are priced in different currencies. It states that the prices of the same good in different markets should be equal after adjustment for exchange rates and that equality should persist through exchange rate fluctuations.
My research simulates the market conditions that should precipitate the ‘law of one price.’ Data was obtained from the simulated trade between algorithmic artificial intelligence agents that operated under induced boundedly rational market behaviors. Trade took place in two initially separate markets, a high-price market with a higher equilibrium price and a low-price market with a lower equilibrium price. Those markets became linked via the added ability of seller agents in the low-price market to sell units of commodity in the high-price market after trading in their original low-price market.
These market conditions did result in data that was consistent with the ‘law of one price’ along with significant market dynamics as prices in the separate markets adjusted towards a common equilibrium price. It is my understanding that the dynamics of price adjustment rates and how they occur differently between two previously separated markets has not been investigated at any significant depth in the field of economics. Although prices adjusted to support the ‘law of one price’ after a considerable length of time, real-world exchange rates constantly fluctuate. Further research into these adjustment rates could be useful for governments and corporations when two previously separate markets become linked, where there is potential for control and/or extreme increase in profit.
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Recommended Citation
C. Wilkins, "A simulation assessment of the 'law of one orice'," M. S. thesis, Chapman University, Orange, CA, 2026. https://doi.org/10.36837/chapman.000758
Included in
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