COMPETITIVE MARKET BEHAVIOR: CONVERGENCE AND ASYMMETRY IN THE EXPERIMENTAL DOUBLE AUCTION

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...

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Bibliographic Details
Published inInternational economic review (Philadelphia) Vol. 64; no. 3; pp. 1087 - 1126
Main Authors Ikica, Barbara, Jantschgi, Simon, Nax, Heinrich H., Duran, Diego G. Nuñez, Pradelski, Bary S. R.
Format Journal Article
LanguageEnglish
Published Philadelphia Blackwell Publishing Ltd 01.08.2023
Wiley
Subjects
Asymmetry
Auctions
Convergence
Decentralization
Economic theory
Economics and Finance
Equilibrium
Humanities and Social Sciences
Prices
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Summary: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.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12630