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Controlling Monopoly Power in a Double-Auction Market Experiment

Author

Listed:
  • Giuseppe Attanasi

    (Université Côte d'Azur, CNRS, GREDEG, France)

  • Kene Boun My

    (BETA, Université de Strasbourg)

  • Andrea Guido

    (Institute for Futures Studies
    Laboratory for Agent-Based Social Simulations (LABSS))

  • Mathieu Lefebvre

    (BETA, Université de Strasbourg)

Abstract

There is robust evidence in the experimental economics literature showing that monopoly power is affected by trading institutions. In this paper we study whether trading institutions themselves can shape agents' market behaviour through the formation of anchors and reference points. We recreate experimentally five different double-auction market structures (perfect competition, perfect competition with quotas, cartel on price, cartel on price with quotas, and monopoly) in a within-subject design, varying the order of markets implementation. We investigate whether monopoly power endures the formation of reference prices emerged in previously implemented market structures. Results from our classroom experiments suggest that double-auction trading institutions succeed in preventing monopolists to exploit their market power. Furthermore, the formation of reference points in previously implemented markets negatively impacts on monopolists' power in later market structures.

Suggested Citation

  • Giuseppe Attanasi & Kene Boun My & Andrea Guido & Mathieu Lefebvre, 2020. "Controlling Monopoly Power in a Double-Auction Market Experiment," GREDEG Working Papers 2020-06, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2020-06
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    2. Giuseppe Attanasi & Samuele Centorrino & Elena Manzoni, 2021. "Zero‐intelligence versus human agents: An experimental analysis of the efficiency of Double Auctions and Over‐the‐Counter markets of varying sizes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 895-932, October.
    3. Neugebauer, Tibor & Shachat, Jason & Szymczak, Wiebke, 2023. "A test of the Modigliani-Miller theorem, dividend policy and algorithmic arbitrage in experimental asset markets," Journal of Banking & Finance, Elsevier, vol. 154(C).
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    5. Lu, Dong & Zhan, Yaosong, 2022. "Over-the-counter versus double auction in asset markets with near-zero-intelligence traders," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).

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    More about this item

    Keywords

    Double Auctions; Perfect Competition; Monopoly; Market Imperfection; Spillovers; Classroom Experiments;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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