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Convergence of Double Auctions to Pareto Optimal Allocations in the Edgeworth Box

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  • Dhananjay K.
  • Shyam Sunder
  • Stephen Spear

Abstract

Double auctions with profit-motivated human traders as well as "zero-intelligence" programmed traders have previously been shown to converge to Pareto optimal allocations in partial equilibrium settings. We show that these results remain robust in two-good general equilibrium settings and elucidate how market structure, not optimization by traders, guides efficient resource allocation.

Suggested Citation

  • Dhananjay K. & Shyam Sunder & Stephen Spear, 2004. "Convergence of Double Auctions to Pareto Optimal Allocations in the Edgeworth Box," Yale School of Management Working Papers amz2518, Yale School of Management, revised 01 Apr 2008.
    • Handle: RePEc:ysm:wpaper:amz2518
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    References listed on IDEAS

    as
    1. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-137, February.
    2. Antoni Bosch-Domenech & Shyam Sunder, 2000. "Tracking the Invisible Hand: Convergence of Double Auctions to Competitive Equilibrium," Computational Economics, Springer;Society for Computational Economics, vol. 16(3), pages 257-284, December.
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