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Convergence of outcomes and evolution of strategic behavior in double auctions

Published on Jul 1, 2013in Journal of Evolutionary Economics1.44
· DOI :10.1007/s00191-011-0226-4
Shira Fano2
Estimated H-index: 2
(Bocconi University),
Marco LiCalzi14
Estimated H-index: 14
(Ca' Foscari University of Venice),
Paolo Pellizzari11
Estimated H-index: 11
(Ca' Foscari University of Venice)
Abstract
We study the emergence of strategic behavior in double auctions with an equal number of buyers and sellers, under the distinct assumptions that orders are cleared simultaneously or asynchronously. The evolution of strategic behavior is modeled as a learning process driven by a genetic algorithm. We find that, as the size of the market grows, allocative inefficiency tends to zero and performance converges to the competitive outcome, regardless of the order-clearing rule. The main result concerns the evolution of strategic behavior as the size of the market gets larger. Under simultaneous order-clearing, only marginal traders learn to be price takers and make offers equal to their valuations/costs. Under asynchronous order-clearing, all intramarginal traders learn to be price makers and make offers equal to the competitive equilibrium price. The nature of the order-clearing rule affects in a fundamental way what kind of strategic behavior we should expect to emerge.
  • References (19)
  • Citations (13)
References19
Newest
#2Steven R. WilliamsH-Index: 15
76 CitationsSource
#1Mikhail Anufriev (UvA: University of Amsterdam)H-Index: 13
#2Jasmina Arifovic (SFU: Simon Fraser University)H-Index: 19
Last.Valentyn Panchenko (UNSW: University of New South Wales)H-Index: 12
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21 CitationsSource
#1Roberto Cervone (Ca' Foscari University of Venice)H-Index: 1
#2Stefano Galavotti (UniFI: University of Florence)H-Index: 2
Last.Marco LiCalzi (Ca' Foscari University of Venice)H-Index: 14
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9 CitationsSource
#1Wenjie Zhan (HUST: Huazhong University of Science and Technology)H-Index: 1
#2Daniel Friedman (UCSC: University of California, Santa Cruz)H-Index: 38
45 CitationsSource
#1Jeffrey K. MacKie-Mason (UM: University of Michigan)H-Index: 30
#2Michael P. Wellman (UM: University of Michigan)H-Index: 53
59 CitationsSource
#1Daniel AshlockH-Index: 26
279 Citations
#1Steve Phelps (University of Liverpool)H-Index: 13
#2Simon Parsons (CUNY: City University of New York)H-Index: 48
Last.Peter McBurney (University of Liverpool)H-Index: 39
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53 CitationsSource
#1Mark A. Satterthwaite (NU: Northwestern University)H-Index: 29
#2Steven R. Williams (UIUC: University of Illinois at Urbana–Champaign)H-Index: 15
74 CitationsSource
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139 CitationsSource
Cited By13
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#1Olga A. Rud (Bates College)H-Index: 2
#2Jean Paul Rabanal (Bates College)H-Index: 3
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#1Michiel van de Leur (UvA: University of Amsterdam)H-Index: 1
#2Mikhail Anufriev (UTS: University of Technology, Sydney)H-Index: 13
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#1Giulio Bottazzi (Sant'Anna School of Advanced Studies)H-Index: 23
#2Pietro Dindo (UniPi: University of Pisa)H-Index: 8
1 CitationsSource
#1Mikhail Anufriev (UvA: University of Amsterdam)H-Index: 13
#2Jasmina Arifovic (SFU: Simon Fraser University)H-Index: 19
Last.Valentyn Panchenko (UNSW: University of New South Wales)H-Index: 12
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#1M. Ruijgrok (UU: Utrecht University)H-Index: 5
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#1Paolo Pellizzari (Ca' Foscari University of Venice)H-Index: 11
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#1Shira Fano (Bocconi University)H-Index: 2
#2Paolo PellizzariH-Index: 11
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#1Florian HauserH-Index: 5
#2Marco LiCalzi (Ca' Foscari University of Venice)H-Index: 14
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