Phase Transition in a Bounded Rational Speculative and Hedging Model

The authors create an economic model of two interacting markets with bounded rational agents that exhibits emergence of market preference arising from a broken market-exchange symmetry. Such emergence can cause agents to move money from one market into the other resulting in a market crash in certain scenarios. The market-exchange symmetry and its breaking gives a statistical mechanics perspective to the ideas of the Sonnenschein-Mantel-Debreu theorem.