Double auction dynamics: structural effects of non-binding price controls

Double Auction Dynamics: Structural Consequences of Non-Binding Price Controls* Dhananjay (Dan) K. Gode

In competitive equilibrium, non-binding price controls (that is, price floors below and ceilings above the equilibrium) should have no effect on market outcomes, but in laboratory experiments they do. We build a simple dynamic model of double auction markets with “zero-intelligence” (ZI) computer traders that accounts for many, though not all, of the discrepancies between the data and the Walra...

Information perception and price dynamics in a continuous double auction

Price Discovery Using a Double Auction

We investigate equilibrium in the buyer’s bid double auction (BBDA) in a model with correlated signals and either private or interdependent values. Using a combination of theorems and numerical experiments, we demonstrate that simple equilibria exist even in small markets. Moreover, we bound traders’ strategic behavior as a function of market size and derive rates of convergence to zero of (i) ...

Structural Inferences from First-Price Auction Experiments

We use structural methods to assess equilibrium models of bidding with data from firstprice auction experiments. We identify conditions to test the Nash equilibrium models for homogenous and for heterogeneous constant relative risk aversion when bidders’ private valuations are independent and uniformly drawn. The outcomes of our study indicate that behavior may have been affected by the procedu...

Price Dynamics, Informational Efficiency, and Wealth Distribution in Continuous Double-Auction Markets

This paper studies the properties of the continuous double auction trading mechanism using an artificial market populated by heterogeneous computational agents. In particular, we investigate how changes in the population of traders and in market microstructure characteristics affect price dynamics, information dissemination and distribution of wealth across agents. In our computer simulated mar...