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A cellular automaton (CA) is a type of discrete model that is used in math, physics and lots of other applications. A CA simply bases its state on the state of its neighbors at each time step. The CA lattice consists of a grid of cells that has a finite number of states. There can be two states, like a binary system, or hundreds of thousands of states depending on the model. A cell updates its state at each time step based on some update rule that consists of getting information from its neighbors and then doing a calculation with that information to determine the new state.

The Cellular Market Model is a cellular automata based on the concept of majority rules. CMM is designed to simulate commodity markets by assuming that most traders do not trade based on economic logic, but instead buy and sell commodities based on what their neighbors are buying and selling. Majority rules works like this. Suppose each cells has N neighbors with ni opinions. The probability of choosing an opinion is Pi =ni/N. For example, if you had two competing opinions, a threshold would occur at 50% of the population. If any state gained more than 50% of the population, the other state would have less than 50% of the population. The state with the majority would win, thus majority rules.

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