Convergence of outcomes and evolution of strategic behavior in double auctions

Shira Fano (), Marco Li Calzi () and Paolo Pellizzari
Additional contact information
Marco Li Calzi: Dept. of Applied Mathematics and Advanced School of Economics, University of Venice
Authors registered in the RePEc Author Service: Marco Li Calzi

No 196, Working Papers from Department of Applied Mathematics, Università Ca' Foscari Venezia

Abstract: We study the emergence of strategic behavior in double auctions with an equal number n of buyers and sellers, under the distinct assumptions that orders are cleared simultaneously or asynchronously. The evolution of strategic behavior is modeled as a learning process driven by a genetic algorithm. We find that, as the size n of the market grows, allocative inefficiency tends to zero and performance converges to the competitive outcome, regardless of the order-clearing rule. The main result concerns the evolution of strategic behavior. Under simultaneous order-clearing, as n increases, only marginal traders learn to be price takers and make offers equal to their valuations/costs. Under asynchronous order-clearing, as n increases, all intramarginal traders learn to be price makers and make offers equal to the competitive equilibrium price. The nature of the order-clearing rule affects in a fundamental way what kind of strategic behavior we should expect to emerge.

Keywords: Trading protocols; asymptotic equivalence; learning; genetic algorithms. (search for similar items in EconPapers)
JEL-codes: C63 C72 D44 D82 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-02
New Economics Papers: this item is included in nep-cmp
References: View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Forthcoming in Journal of Evolutionary Economics

Downloads: (external link)
http://virgo.unive.it/wpideas/storage/2010wp196.pdf First version, 2010 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to virgo.unive.it:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
Journal Article: Convergence of outcomes and evolution of strategic behavior in double auctions (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vnm:wpaper:196

Access Statistics for this paper

More papers in Working Papers from Department of Applied Mathematics, Università Ca' Foscari Venezia Contact information at EDIRC.
Bibliographic data for series maintained by Daria Arkhipova ().