Learning to trade in an unbalanced market

Florian Hauser () and Marco LiCalzi
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Florian Hauser: Department of Banking and Finance, Universitat Innsbruck

No 2, Working Papers from Venice School of Management - Department of Management, Università Ca' Foscari Venezia

Abstract: We study the evolution of trading strategies in double auctions as the size of the market gets larger. When the number of buyers and sellers is balanced, Fano et al. (2011) show that the choice of the order-clearing rule (simultaneous or asynchronous) steers the emergence of fundamentally different strategic behavior. We extend their work to unbalanced markets, confirming their main result as well as that allocative inefficiency tends to zero. On the other hand, we discover that convergence to the competitive outcome takes place only when the market is large and that the long side of the market is more effective at improving its disadvantaged terms of trade under asynchronous order-clearing.

Keywords: Trading protocols; Market design; Allocative efficiency; Genetic Programming (search for similar items in EconPapers)
JEL-codes: C63 D82 G10 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2011-04
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Citations:

Published in S. Osinga, G.J. Hofstede, and T. Verwaart (eds.), Emergent Results of Artificial Economics, Springer, 2011, 65-76

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Chapter: Learning to Trade in an Unbalanced Market (2011)
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