Convergence of outcomes and evolution of strategic behavior in double auctions

Shira Fano (), Marco LiCalzi and Paolo Pellizzari

Journal of Evolutionary Economics, 2013, vol. 23, issue 3, 513-538

Abstract: We study the emergence of strategic behavior in double auctions with an equal number 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 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 as the size of the market gets larger. Under simultaneous order-clearing, only marginal traders learn to be price takers and make offers equal to their valuations/costs. Under asynchronous order-clearing, 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. Copyright Springer-Verlag 2013

Keywords: Trading protocols; Asymptotic equivalence; Learning; Genetic algorithms; D44; D82; C63; C72 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00191-011-0226-4 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Convergence of outcomes and evolution of strategic behavior in double auctions (2010)
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:spr:joevec:v:23:y:2013:i:3:p:513-538

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/191/PS2

DOI: 10.1007/s00191-011-0226-4

Access Statistics for this article

Journal of Evolutionary Economics is currently edited by Uwe Cantner, Elias Dinopoulos, Horst Hanusch and Luigi Orsenigo

More articles in Journal of Evolutionary Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().