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A Simulation on the Evolution of Markets: Call Market, Decentralized and Posted Offer

Author

Listed:
  • Jean Paul Rabanal

    (Ball State University)

  • Olga A. Rabanal

    (Ball State University)

Abstract

We apply standard evolutionary dynamics to study of stability of three competing market formats –call market (CM), posted offer (PO) and decentralized market (DM). In our framework, heterogeneous buyers and sellers seek to transact a homogeneous good, which can be done by allocating their time among three different market formats. We study the allocation of time among different formats using simulations of a large (evolutionary) dynamic system. Our results show that (i) the final participation of traders in CM is much higher compared to the two other formats, (ii) the PO can coexist with CM, and (iii) DM vanishes against CM in the long run but can survive against PO, depending on the initial participation conditions.

Suggested Citation

  • Jean Paul Rabanal & Olga A. Rabanal, 2015. "A Simulation on the Evolution of Markets: Call Market, Decentralized and Posted Offer," Working Papers 34, Peruvian Economic Association.
    • Handle: RePEc:apc:wpaper:2015-034
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    References listed on IDEAS

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    More about this item

    Keywords

    Centralized markets; decentralized markets; decentralized bargaining; market design; market formation; evolutionary dynamics;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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