Game Theory

Game theory is a theoretical framework for conceiving social situations among competing players. The framework is helpful in analyzing situations where individual choices affect each other’s outcomes, which is a fundamental characteristic of open systems.

In this case, the open system is the free market around AMPL, where all traders are players.

Rational traders are constantly competing with one another to find the point of highest profitability (when the value of their AMPL position is highest in terms of price-per-AMPL versus held supply).

All players are readily aware of other players' positions, what the expected rebase adjustment will be each day, and when it will occur.

This is why heavier volatility occurs around the daily rebase adjustment, with the fastest traders exiting their positions at the best price before either leaving the market or entering at a lower price to capture future supply growth.