Thursday, March 26, 2020

Systematic steps to using sandbox theory

This is a repeat. The idea is simple.

Find the aggregate flow under study and assume transaction costs tend to a very small trivial amount over the networked flows. You are lowering fixed inventory costs until you can see underflow and overflow in inventory. Then on identifying the congestion point, install an automated trading pit, a two color dynamic inventory packing model.  Walmart and Amazon live by this motto.

As Zero Hedge says, we have to mark to market. In abstract tree theory (sandbox by another name), we call that 'keeping the Tree Trunk round'.  The market foces the structured queue, basket sizes get properly set along the value chains. Chart analysts unable to find breaking points.

Economically this is Hayek( generator triangles) , Krugman (agglomeration theory), Fama ( information processor ), Huffman/Shannon (structured queues); then Coase (transaction costs trivial)  and Nash (bounder error is known).  And a  long list of mathematicians.

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