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Competitive Market Behavior: Convergence And Asymmetry In The Experimental Double Auction

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  • Barbara Ikica
  • Simon Jantschgi
  • Heinrich H. Nax
  • Diego G. Nuñez Duran
  • Bary S. R. Pradelski

Abstract

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.

Suggested Citation

  • Barbara Ikica & Simon Jantschgi & Heinrich H. Nax & Diego G. Nuñez Duran & Bary S. R. Pradelski, 2023. "Competitive Market Behavior: Convergence And Asymmetry In The Experimental Double Auction," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1087-1126, August.
    • Handle: RePEc:wly:iecrev:v:64:y:2023:i:3:p:1087-1126
    DOI: 10.1111/iere.12630
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