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Discrete Double Auctions with Artificial Adaptive Agents: A Case Study of an Electricity Market Using a Double Auction Simulator

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  • Koesrindartoto, Deddy P.
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    Abstract

    A key issue raised by previous researchers is the extent to which learning versus market structure is responsible for the high efficiency regularly observed for the double auction in human-subject experiments. In this study, a computational discrete double auction with discriminatory pricing is tested regarding the importance of learning agents for ensuring market efficiency. Agents use a Roth-Erev reinforcement learning algorithm to determine their bid and ask prices. The experimental design focuses on two treatment factors: market capacity; and a key Roth?Erev learning parameter that controls that degree of agent experimentation. For each capacity setting, it is shown that changes in the learning parameter have a substantial systematic effect on market efficiency.

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    File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p3809-2002-09-12.pdf
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    Bibliographic Info

    Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10017.

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    Date of creation: 12 Sep 2002
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    Handle: RePEc:isu:genres:10017

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    Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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    1. Bower, John & Bunn, Derek, 2001. "Experimental analysis of the efficiency of uniform-price versus discriminatory auctions in the England and Wales electricity market," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 561-592, March.
    2. 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 119-37, February.
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    Cited by:
    1. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.

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