Physica A 311 (2002) 527–535 www.elsevier.com/locate/physa Statistical physics of induced correlation in a simple market David Sherrington, Esteban Moro ∗ , Juan Pedro Garrahan Department of Physics, University of Oxford, Theoretical Physics, 1 Keble Road, Oxford OX1 3NP, UK Received 15 March 2002 Abstract A simple model for the collective behaviour of diverse speculative agents in a competitive mar- ket is considered from the point of view of statistical physics. The only information about other agents available to any one is the total trade eected at each time-step. Evidence is presented for correlated adaptation, phase transitions, scaling, regimes of non-equilibration and equilibration, and relevant stochasticity. An intermediate-level quasi-continuous micro-dynamics is derived and shown to have a novel character. c  2002 Elsevier Science B.V. All rights reserved. PACS: 02.50.Le; 05.65.+b; 05.70.Fh; 87.23.Ge Keywords: Minority game; Econophysics; Disordered systems 1. Introduction This paper reviews some recent work on the application of methodology of statistical physics to a simple but interesting model problem inspired by a stockmarket of many individual speculators attempting to prot by buying low and selling high but with only global macroscopic information on which to base decisions (and no knowledge of their fellow-speculators as individuals). Before describing the model, one might ask why such an economics-based model should be of professional interest to statistical physicists. At two extremes one can consider the answer as a producer or a consumer, the former in terms of the potential of statistical physics to aid the economist by complementing conventional neo-classical * Corresponding author. Departamento de Matematicas, Universidad Carlos III de Madrid, Avda. de la Universidad 30, 28911 Leganes, Spain. Tel.: +34-91-6249101; fax: +34-91-6249129. E-mail address: emoro@math.uc3m.es (E. Moro). 0378-4371/02/$-see front matter c  2002 Elsevier Science B.V. All rights reserved. PII:S0378-4371(02)00835-X