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The allocative effectiveness of market protocols under intelligent trading

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Author Info
Marco LiCalzi ()
Paolo Pellizzari (Department of Applied Mathematics, University of Venice)

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Abstract

We study the performance of four market protocols that lead to allocative efficiency: batch auction, continuous double auction, specialist dealership, and a hybrid of these last two. In a former study, we compared them with respect to several additional performance criteria under the assumption of zero intelligence. This paper analyzes three performance criteria under different ways to remove the assumption of zero intelligence. The following conclusions are robust. The number of wasteful transaction is minimized by the batch auction and the dealership. Moreover, the former minimizes price dispersion and the latter minimizes time to convergence.

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File URL: http://www.dma.unive.it/wpdma/2006wp134.pdf
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Publisher Info
Paper provided by Department of Applied Mathematics, University of Venice in its series Working Papers with number 134.

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Length: 13 pages
Date of creation: May 2006
Date of revision:
Publication status: Published in C. Bruun (ed.), Advances in Artificial Economics, Springer, 2006, 17-29.
Handle: RePEc:vnm:wpaper:134

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Web page: http://www.dma.unive.it/
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Related research
Keywords: evaluation of market protocols; market design; microstructure; agent-based methodologies;

Other versions of this item:

Find related papers by JEL classification:
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
G19 - Financial Economics - - General Financial Markets - - - Other
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques

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References listed on IDEAS
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.:
  1. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December. [Downloadable!] (restricted)
  2. Nicolas Audet & Toni Gravelle & Jing Yang, 2002. "Alternative Trading Systems: Does One Shoe Fit All?," Working Papers 02-33, Bank of Canada. [Downloadable!]
  3. Marco LiCalzi & Paolo Pellizzari, 2005. "Simple market protocols for efficient risk sharing," Finance 0504019, EconWPA. [Downloadable!]
    Other versions:
  4. Shyam Sunder, 2002. "Markets as Artifacts: Aggregate Efficiency from Zero-Intelligence Traders," Yale School of Management Working Papers ysm284, Yale School of Management. [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Marco LiCalzi & Paolo Pellizzari, 2008. "Zero-Intelligence Trading without Resampling," Working Papers 164, Department of Applied Mathematics, University of Venice. [Downloadable!]
  2. Marco LiCalzi & Lucia Milone & Paolo Pellizzari, 2008. "Allocative efficiency and traders' protection under zero intelligence behavior," Working Papers 168, Department of Applied Mathematics, University of Venice, revised Nov 2009. [Downloadable!]
  3. Marco LiCalzi & Paolo Pellizzari, 2006. "Simple Market Protocols for Efficient Risk Sharing," Working Papers 136, Department of Applied Mathematics, University of Venice. [Downloadable!]
    Other versions:
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