In contrast with the canonical models of financial markets with heterogeneous agents,, Naimzada and Ricchiuti, (2008, 2009) show that the interaction of groups of agents who have the same trading rule but present different beliefs about the fundamental value could be a source of instability. In this paper, differently from, Naimzada and Ricchiuti, (2008, 2009), we assume that the market maker employs a so-called multiplicative price mechanism (Tuinstra, 2002; Zhu et al., 2009). We show that the occurrence of heterogeneity has an ambiguous role: it may either stabilize or destabilize the market.
The article has been published on Economic Notes, and can be downloaded here
(the preliminary WP can be downloaded here)