Equilibrium Discovery and Preopening Mechanisms in an Experimental Market
AbstractWe experimentally analyze equilibrium discovery in i) a pure call auction, ii) a call auction preceded by a nonbinding preopening period, and iii) a call auction preceded by a binding preopening period. We examine whether a preopening period can facilitate coordination on the Pareto dominant equilibrium. During the nonbinding preopening period, traders tend to place manipulative orders. After observing such orders, participants learn to distrust cheap talk and coordinate less on Pareto dominant outcomes. In contrast, we find that, when preopening orders are binding, they improve the ability to coordinate on high gains from trade.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-001.
Date of creation: Jan 2009
Date of revision:
Publication status: Published in Management Science, vol.�60, n°3, mars 2014.
Other versions of this item:
- Biais, Bruno & Bisière, Christophe & Pouget, Sébastien, 2009. "Equilibrium Discovery and Preopening Mechanisms in an Experimental Market," IDEI Working Papers 543, Institut d'Économie Industrielle (IDEI), Toulouse.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bruno Biais & Pierre Hillion & Chester Spatt, 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1218-1248, December.
- Crawford, Vincent P & Haller, Hans, 1990. "Learning How to Cooperate: Optimal Play in Repeated Coordination Games," Econometrica, Econometric Society, vol. 58(3), pages 571-95, May.
- J. B. Van Huyck & R. C. Battalio & R. O. Beil, 2010.
"Tacit coordination games, strategic uncertainty, and coordination failure,"
Levine's Working Paper Archive
661465000000000393, David K. Levine.
- Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-48, March.
- John B Van Huyck & Raymond C Battalio & Richard O Beil, 1997. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 1225, David K. Levine.
- Pagano, Marco, 1989.
"Trading Volume and Asset Liquidity,"
The Quarterly Journal of Economics,
MIT Press, vol. 104(2), pages 255-74, May.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- James Dow, 2004. "Is Liquidity Self-Fulfilling?," The Journal of Business, University of Chicago Press, vol. 77(4), pages 895-908, October.
- Kenneth Clark & Stephen Kay & Martin Sefton, 2001.
"When are Nash equilibria self-enforcing? An experimental analysis,"
International Journal of Game Theory,
Springer, vol. 29(4), pages 495-515.
- Clark, K. & Kay, S. & Sefton, M, 1997. "When Are Nash Equilibria Self Enforcing ? An Experimental Analysis," Working Papers 97-04, University of Iowa, Department of Economics.
- Kenneth Clark & Stephen Kay & Martin Sefton, 1997. "When Are Nash Equilibria Self-Enforcing? An Experimental Analysis," Experimental 9707001, EconWPA.
- Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
- Blume, Andreas & Ortmann, Andreas, 2007. "The effects of costless pre-play communication: Experimental evidence from games with Pareto-ranked equilibria," Journal of Economic Theory, Elsevier, vol. 132(1), pages 274-290, January.
- Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May.
- Davies, Ryan J., 2003. "The Toronto Stock Exchange preopening session," Journal of Financial Markets, Elsevier, vol. 6(4), pages 491-516, August.
- Crawford, Vincent P, 1995.
"Adaptive Dynamics in Coordination Games,"
Econometric Society, vol. 63(1), pages 103-43, January.
- Charness, Gary, 2000. "Self-Serving Cheap Talk: A Test Of Aumann's Conjecture," Games and Economic Behavior, Elsevier, vol. 33(2), pages 177-194, November.
- Schmidt, David & Shupp, Robert & Walker, James M. & Ostrom, Elinor, 2003. "Playing safe in coordination games:: the roles of risk dominance, payoff dominance, and history of play," Games and Economic Behavior, Elsevier, vol. 42(2), pages 281-299, February.
- Forsythe, Robert & Lundholm, Russell & Rietz, Thomas, 1999. "Cheap Talk, Fraud, and Adverse Selection in Financial Markets: Some Experimental Evidence," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 481-518.
- Joseph Farrell, 1987. "Cheap Talk, Coordination, and Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 34-39, Spring.
- Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
- COOPER, R. & DEJONG, D.V. & FORSYTHE, R. & Tom Ross, 1989. "Communication In Coordination Games," Carleton Industrial Organization Research Unit (CIORU) 89-07, Carleton University, Department of Economics.
- Lescourret, Laurence, 2012.
"Non-Fundamental Information and Market-Makers' Behavior during the NASDAQ Preopening Session,"
ESSEC Working Papers
WP1212, ESSEC Research Center, ESSEC Business School.
- Laurence Lescourret, 2012. "Non-fundamental Information and Market-makers' Behavior during the NASDAQ Preopening Session," Post-Print hal-00772798, HAL.
- Calcagno, Riccardo & Sugaya, Takuo & Kamada, Yuichiro & Lovo, Stefano, 2014. "Asynchronicity and coordination in common and opposing interest games," Theoretical Economics, Econometric Society, vol. 9(2), May.
- Robert Kelly, 2008. "Opening and Closing Asymmetry: Empirical Analysis from ISE Xetra," The Economic and Social Review, Economic and Social Studies, vol. 39(1), pages 55-78.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.