Competitive market behavior: convergence and asymmetry in the experimental double auction

Barbara Ikica, Simon Jantschgi, Heinrich Nax, Diego Duran and Bary Pradelski ()
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Barbara Ikica: UZH - Universität Zürich [Zürich] = University of Zurich, ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]
Simon Jantschgi: UZH - Universität Zürich [Zürich] = University of Zurich
Heinrich Nax: UZH - Universität Zürich [Zürich] = University of Zurich, ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]
Diego Duran: UZH - Universität Zürich [Zürich] = University of Zurich, ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]
Bary Pradelski: POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems - Centre Inria de l'Université Grenoble Alpes - Inria - Institut National de Recherche en Informatique et en Automatique - LIG - Laboratoire d'Informatique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes, UZH - Universität Zürich [Zürich] = University of Zurich, ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

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Abstract: We conducted a large number of controlled continuous double auction experiments to reproduce and stress-test the phenomenon of convergence to competitive equilibrium under private information with decentralized trading feedback. Our main finding is that across a total of 104 markets (involving over 1,700 subjects), convergence occurs after a handful of trading periods. Initially, however, there is an inherent asymmetry that favors buyers, typically resulting in prices below equilibrium levels. Analysis of over 80,000 observations of individual bids and asks helps identify empirical ingredients contributing to the observed phenomena including higher levels of aggressiveness initially among buyers than sellers.

Date: 2023
New Economics Papers: this item is included in nep-exp
Note: View the original document on HAL open archive server: https://hal.science/hal-04367512v1
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Published in International Economic Review, 2023, 64 (3), pp.1087 - 1126. ⟨10.1111/iere.12630⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04367512

DOI: 10.1111/iere.12630

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