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Evolution of markets: a simulation with centralized, decentralized and posted offer formats

Olga Rud () and Jean Paul Rabanal ()

Journal of Evolutionary Economics, 2018, vol. 28, issue 3, 667-689

Abstract: Abstract We apply standard evolutionary dynamics to study trader participation in three competing market formats —call market (CM), posted offer (PO) and decentralized market (DM). In our framework, heterogeneous buyers and sellers seek to transact a homogeneous good, which can be done by allocating their time among three different market formats. Our results show that (i) the final participation of traders in the CM is much higher, (ii) the PO can coexist with the CM, (iii) the DM unravels when competing against CM and (iv) the DM can coexist with the PO, depending on the initial participation conditions. Thus, we demonstrate that agent-based micro-simulations coupled with replication dynamics can reproduce most of the previously known theoretical results and have the potential to investigate other commonly used hybrid auction protocols.

Keywords: Centralized markets; Decentralized markets; Decentralized bargaining; Market design; Market formation; Evolutionary dynamics (search for similar items in EconPapers)
JEL-codes: D40 C78 C73 L10 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:joevec:v:28:y:2018:i:3:d:10.1007_s00191-016-0488-y