Convergence of Double Auctions to Pareto Optimal Allocations in the Edgeworth Box

Dhananjay K., Shyam Sunder and Stephen Spear ()

Yale School of Management Working Papers from Yale School of Management

Abstract: Double auctions with profit-motivated human traders as well as "zero-intelligence" programmed traders have previously been shown to converge to Pareto optimal allocations in partial equilibrium settings. We show that these results remain robust in two-good general equilibrium settings and elucidate how market structure, not optimization by traders, guides efficient resource allocation.

Keywords: Pareto optimal allocations; Edgeworth Box; Double auction; Zero-intelligence traders (search for similar items in EconPapers)
Date: 2004-06-01, Revised 2008-04-01
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