A single-item continuous double auction game

Matthijs Ruijgrok

MPRA Paper from University Library of Munich, Germany

Abstract: A double auction game with an infinite number of buyers and sellers is introduced. All sellers posses one unit of a good, all buyers desire to buy one unit. Each seller and each buyer has a private valuation of the good. The distribution of the valuations define supply and demand functions. One unit of the good is auctioned. At successive, discrete time instances, a player is randomly selected to make a bid (buyer) or an ask (seller). When the maximum of the bids becomes larger than the minimum of the asks, a transaction occurs and the auction is closed. The players have to choose the value of their bid or ask before the auction starts and use this value when they are selected. Assuming that the supply and demand functions are known, expected profits as functions of the strategies are derived, as well as expected transaction prices. It is shown that for linear supply and demand functions, there exists at most one Bayesian Nash equilibrium. Competitive behaviour is not an equilibrium of the game. For linear supply and demand functions, the sum of the expected profit of the sellers and the buyers is the same for the Bayesian Nash equilibrium and the market where players behave competitively. Connections are made with the ZI-C traders model and the $k$-double auction.

Keywords: Continuous double auction; supply and demand; Bayesian Nash equilibrium; ZI-C model; k-double auction (search for similar items in EconPapers)
JEL-codes: C72 D44 (search for similar items in EconPapers)
Date: 2012-10-19
New Economics Papers: this item is included in nep-bec, nep-gth, nep-hpe and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/42086/1/MPRA_paper_42086.pdf original version (application/pdf)

Related works:
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:pra:mprapa:42086

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().