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

25 Pages Posted: 10 Jun 2004

See all articles by Dhananjay (Dan) K. Gode

Dhananjay (Dan) K. Gode

New York University (NYU) - Department of Accounting

Shyam Sunder

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

Stephen Spear

Carnegie Mellon University - Financial Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 7, 2004

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.

Keywords: Pareto optimal allocations, Edgeworth Box, Double auction, Zero-intelligence traders

JEL Classification: C63, C68, D44, D51, D58, D61

Suggested Citation

Gode, Dhananjay (Dan) K. and Sunder, Shyam and Spear, Stephen E., Convergence of Double Auctions to Pareto Optimal Allocations in the Edgeworth Box (June 7, 2004). Yale ICF Working Paper No. 04-30. Available at SSRN: https://ssrn.com/abstract=555862

Dhananjay (Dan) K. Gode (Contact Author)

New York University (NYU) - Department of Accounting ( email )

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Shyam Sunder

Yale University - School of Management ( email )

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

Yale University - Cowles Foundation

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New Haven, CT 06520-8281
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Stephen E. Spear

Carnegie Mellon University - Financial Economics ( email )

GSIA
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Pittsburgh, PA 15213
United States

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