Competitivity in Auction Markets: An Experimental and Theoretical Investigation

Daniel Friedman and Joseph Ostroy

Economic Journal, 1995, vol. 105, issue 428, 22-53

Abstract: The authors report successive rounds of theory and laboratory experiments investigating price-taking behavior and market efficiency. They focus on the impact of structural parameters as well as trading institution. The structural parameters involve noncompetitive supply and demand, and a new odd-lot trading procedure for divisible goods. The trading institutions include the continuous double auction and the one-shot clearinghouse as well as a new quantities-only clearinghouse institution. The authors present and justify an as-if complete information theory that explains the competitive outcomes and that correctly predicts highly noncompetitive outcomes in quantities-only clearinghouse markets. Copyright 1995 by Royal Economic Society.

Date: 1995
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