Why do Biased Heuristics Approximate Bayes Rule in Double Auctions?

Shyam Sunder and Karim Jamal ()
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Karim Jamal: Department of Accounting & Management Information Systems

Yale School of Management Working Papers from Yale School of Management

Abstract: Jamal and Sunder (1996) showed that the median prices in double auctions populated by zero-intelligence (ZI) traders whose trading limits are set by two biased heuristics tend to converge to the same equilibrium as if their trading limits were set by applying Bayes' Rule. This note provides an analytical explanation of why the repeated use of biased heuristics approximates Bayes rule.

Keywords: Aggregate Market Rationality; Bayesian Equilibrium; Double Auction; Biased Heuristics (search for similar items in EconPapers)
JEL-codes: A12 C11 D44 D81 (search for similar items in EconPapers)
Date: 2001-06-07
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Why do biased heuristics approximate Bayes rule in double auctions? (2001)
Working Paper: Why do Biased Heuristics Approximate Bayes Rule in Double Auctions?
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm197

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