Which performs better under trader settings, double auction or uniform price auction?

Koji Kotani, Kenta Tanaka and Shunsuke Managi

Experimental Economics, 2019, vol. 22, issue 1, No 11, 247-267

Abstract: Abstract A marketable permit system (MPS) has been suggested as a solution to environmental problems. Although the properties of MPSs under non-trader settings, in which each player is exclusively either a seller or a buyer, are well documented, little research has explored how MPSs perform under trader settings, in which each player can be both a seller and a buyer. We institute two auctions of trader settings in MPS experiments: a double auction (DA) and a uniform price auction (UPA). We then evaluate and compare their performances both with each other and with those under non-trader settings. The main results are as follows: DAs under trader settings perform much worse than do DAs under non-trader settings, whereas UPAs perform well, regardless of the trader and non-trader settings. UPAs are more efficient and generate more stable prices than do DAs under trader settings, and a considerable proportion of trades in DAs under trader settings consist of “flips” that could be considered speculation or errors. Thus, UPAs are likely to work better than DAs under trader settings.

Keywords: Marketable permits; Economic experiments; Double auction; Uniform price auction; Non-trader settings; Trader settings (search for similar items in EconPapers)
JEL-codes: C91 D44 Q50 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Which performs better under a trader setting, double auction or uniform price auction? (2015)
Working Paper: On the fundamental performance of a marketable permit system in a trader setting (2014)
Working Paper: On fundamental performance of a marketable permits system in a trader setting: Double auction vs. uniform price auction (2012)
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DOI: 10.1007/s10683-018-9585-0

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