A simple model of opinion formation Katarzyna Sznajd-Weron Institute of Theoretical Physics, University of Wroclaw E-mail: kweron@ift.uni.wroc.pl abstract: In 2000 we proposed a new model of opinion formation named by Stauffer the Sznajd model (SM). The model has found many applications from politics to finance and marketing. We assumed that individual opinion is represented by an Ising spin (yes or no), like in many opinion dynamics models. The really new thing that we introduced was the dynamics of spins. The motivation to propose this new dynamics was a phenomenon called by social psychologists Social Validation one fundamental way that we decide what to do in a situation is to look to what others are doing. A group of people sharing the same opinion in the neighborhood much easier than isolated individuals. In contrast to other agent-based models, the inluence does not flow inward from the surrounding neighbors to the center site, but spreads outward from the center to the neighbors. In this lecture we present two applications of the model. First, we show how the model can describe the mechanism of advertisingin in duopoly markets, i.e. the spread of opinions among customers. When is advertising effective and when is it not? This question has often stimulated heated debate in the world of marketing and advertising. We try to answer the above question via Monte Carlo simulations of a our model. The idea of spreading opinion seemed appealing and we adapted it to model financial markets. We introduced new dynamic rules describing the behavior of two types of market players: trend followers and fundamentalists. Our rules led to a fat-tailed distribution of returns, long-term dependence in volatility and no dependence in returns themselves. References [1] Sznajd-Weron, K., Sznajd, J. "Opinion evolution in closed community", Int. J. Mod. Phys. C 11, 1157 (2000) [2] Sznajd-Weron K., Weron R "How effective is advertising in duopoly markets?" PHYSICA A 324, 437 (2003) [3] Sznajd-Weron K, Weron R "A simple model of price formation" INT J MOD PHYS C 13, 115 (2002)