Featured Research

from universities, journals, and other organizations

Why Youth Hostel Showers Are Like The Stock Market: Variety Provides Stabililty

Date:
February 12, 2008
Source:
University of Bonn
Summary:
Diversity keeps you warm. At least that is true while you're having a shower in youth hostels. This is one way to sums up a new research project. The result is not as trivial as it sounds. Ultimately it shows that heterogeneity provides stability, whether this is in a shower, in power grids or even on the stock market.

Diversity keeps you warm. At least that is true while you're having a shower in youth hostels. If you like, this sums up the research project just published by scientists from the Universities of Fribourg and Bonn. Their result is not as trivial as it sounds. Ultimately it shows that heterogeneity provides stability, whether this is in a shower, in power grids or even on the stock market.

Having a shower in a youth hostel can be risky when there is not enough hot water for everybody. If only one visitor turns up the hot tap during the early morning shower, everyone else is threatened by an icy gush of water. This unwanted form of hydrotherapy is particularly likely to happen when all the shower taps have the same possible settings, in other words if cold and hot water can be adjusted to exactly the same amount in all showers. But if the water taps in each shower have their individual quirks, the risk of extreme fluctuations is less.

At least that is what the Bonn economist Christina Matzke and her colleague Damien Challet, a physicist at the University of Fribourg, say. They modelled the temperature profile of showers in a youth hostel on the computer. 'All in all, heterogeneous taps offer advantages -- they prevent the average shower temperature of all guests from suddenly dropping or rising,' Christina Matzke explains. 'From the perspective of the individual they also have disadvantages, as it's more difficult for each person to set the right temperature.'

The problem sounds comical, but in principle it can be applied to all situations where people compete for a scarce resource, whether this is hot water, electricity or equities. One thing is always true, the more individualistic the behaviour of those involved in the market is, the more stable the whole system becomes. Put simply, the only reason why our electricity grid does not break down is that not all the inhabitants of Germany switch on the tumble drier at the same time. And if all shareholders made strictly rational decisions on their investments, there would probably be a lot more turbulence on the stock market.

The result is also significant from a theoretical point of view. 'We show what different results economic models can produce, depending on whether they are based on homogeneous or heterogeneous behaviour,' Christina Matzke emphasises. Accordingly, it is important to account for differences in individual behaviour when making forecasts. Although it sounds obvious, economists long ignored this insight. For decades their models were dominated by 'homo economicus', an imaginary standardised market investor who always made rational decisions rather than deciding according to individual criteria.


Story Source:

The above story is based on materials provided by University of Bonn. Note: Materials may be edited for content and length.


Cite This Page:

University of Bonn. "Why Youth Hostel Showers Are Like The Stock Market: Variety Provides Stabililty." ScienceDaily. ScienceDaily, 12 February 2008. <www.sciencedaily.com/releases/2008/02/080211100947.htm>.
University of Bonn. (2008, February 12). Why Youth Hostel Showers Are Like The Stock Market: Variety Provides Stabililty. ScienceDaily. Retrieved July 24, 2014 from www.sciencedaily.com/releases/2008/02/080211100947.htm
University of Bonn. "Why Youth Hostel Showers Are Like The Stock Market: Variety Provides Stabililty." ScienceDaily. www.sciencedaily.com/releases/2008/02/080211100947.htm (accessed July 24, 2014).

Share This




More Computers & Math News

Thursday, July 24, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Robot Parking Valet Creates Stress-Free Travel

Robot Parking Valet Creates Stress-Free Travel

AP (July 23, 2014) 'Ray' the robotic parking valet at Dusseldorf Airport in Germany lets travelers to avoid the hassle of finding a parking spot before heading to the check-in desk. (July 23) Video provided by AP
Powered by NewsLook.com
Six Indicted in StubHub Hacking Scheme

Six Indicted in StubHub Hacking Scheme

AP (July 23, 2014) Six people were indicted Wednesday in an international ring that took over more than 1,000 StubHub users' accounts and fraudulently bought tickets that were then resold. (July 23) Video provided by AP
Powered by NewsLook.com
The Reviews Are In For The Amazon Fire Phone

The Reviews Are In For The Amazon Fire Phone

Newsy (July 23, 2014) Amazon's first smartphone, the Fire Phone, is set to ship this week, and so far the reviews have been pretty mixed. Video provided by Newsy
Powered by NewsLook.com
Bigger Apple Phone, Bigger Orders

Bigger Apple Phone, Bigger Orders

Reuters - Business Video Online (July 22, 2014) Apple is asking suppliers to make 70 to 80 million units of its new larger screen iPhone, a lot more initially than its current model. Fred Katayama reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins