Competitive Market Behavior: Convergence and Asymmetry in the Experimental Double Auction

32 Pages Posted: 6 Mar 2018 Last revised: 25 Feb 2021

See all articles by Barbara Ikica

Barbara Ikica

University of Zurich

Simon Jantschgi

affiliation not provided to SSRN

Heinrich H. Nax

ETH Zürich; University of Zurich

Diego Nunez Duran

ETH Zürich - Department of Humanities, Social and Political Sciences (GESS)

Bary Pradelski

CNRS, Université Grenoble Alpes

Date Written: February 27, 2018

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. A common finding across a total of 104 markets (involving 1k+ individual subjects and trading rounds) is convergence after a handful of trading periods. Initially, however, there is evidence for an inherent asymmetry that favors buyers, which is expressed in symmetric markets by deal prices that are significantly below equilibrium prices. Analysis of the 80k+ observations of individual bids and asks helps identify several empirical ingredients contributing to the observed phenomena including higher initial aggressiveness amongst buyers than sellers.

Keywords: competitive equilibrium, double auction, experiments, feedback, large-scale replication

JEL Classification: D83; G14; D90

Suggested Citation

Ikica, Barbara and Jantschgi, Simon and Nax, Heinrich H. and Nunez Duran, Diego and Pradelski, Bary, Competitive Market Behavior: Convergence and Asymmetry in the Experimental Double Auction (February 27, 2018). Available at SSRN: https://ssrn.com/abstract=3131004 or http://dx.doi.org/10.2139/ssrn.3131004

Barbara Ikica

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Simon Jantschgi

affiliation not provided to SSRN

Heinrich H. Nax

ETH Zürich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Diego Nunez Duran

ETH Zürich - Department of Humanities, Social and Political Sciences (GESS) ( email )

Haldeneggsteig 4
Zurich, Zurich 8006
Switzerland

Bary Pradelski (Contact Author)

CNRS, Université Grenoble Alpes ( email )

Grenoble
France

HOME PAGE: http://cnrs.fr

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