Competitive Market Behavior: Convergence and Asymmetry in the Experimental Double Auction
50 Pages Posted: 6 Mar 2018 Last revised: 31 Jan 2023
Date Written: February 27, 2018
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 over 1,700 subjects) 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 over 80,000 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: Suggested Citation