Double Auction Dynamics: Structural Effects of Non-Binding Price Controls

43 Pages Posted: 8 Oct 2008

See all articles by Dhanajay K. Gode

Dhanajay K. Gode

affiliation not provided to SSRN

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Date Written: May 2003

Abstract

In competitive equilibrium, non-binding price controls (that is, price floors below and ceilings above the equilibrium) should not affect market outcomes, but in laboratory experiments they do. We build a simple dynamic model of double auction markets with "zero-intelligence" (ZI) computer traders that accounts for many, though not all, of the discrepancies between the data and the Walrasian tatonnement predictions. The success of the model in organizing the data, and in isolating various consequences of price controls, shows that the simple ZI model is a powerful tool to gain insights into the dynamics of market institutions.

Keywords: Price Controls, Zero-Intelligence, Double Auction Dynamics, Allocative Efficiency

Suggested Citation

Gode, Dhanajay K. and Sunder, Shyam, Double Auction Dynamics: Structural Effects of Non-Binding Price Controls (May 2003). NYU Working Paper No. DHANANJAY (DAN) K. GODE-07. Available at SSRN: https://ssrn.com/abstract=1280705

Dhanajay K. Gode (Contact Author)

affiliation not provided to SSRN

No Address Available

Shyam Sunder

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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