Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments

Charles R. Plott and Kirill Pogorelskiy

American Economic Journal: Microeconomics, 2017, vol. 9, issue 4, 1-41

Abstract: We study multiple-unit, laboratory experimental call markets in which orders are cleared by a single price at a scheduled "call." The markets are independent trading "days" with two calls each day preceded by a continuous and public order flow. Markets approach the competitive equilibrium over time. The price formation dynamics operate through the flow of bids and asks configured as the "jaws" of the order book with contract execution featuring elements of an underlying mathematical principle, the Newton-Raphson method for solving systems of equations. Both excess demand and its slope play a systematic role in call market price discovery.

JEL-codes: C92 D41 D44 G14 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/mic.20150201
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Citations: View citations in EconPapers (19)

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