Symmetric Equilibria in Double Auctions with Markdown Buyers and Markup Sellers
AbstractZhan and Friedman (2007) study double auctions where buyers and sellers are constrained to using simple markdown and markup rules. In spite of the alleged symmetry in roles and assumptions, buyers are shown to have the upper hand both in the call market and in the continuous double auction. We replicate the study and show that their formulation of the sellers’ markup strategies, while seemingly natural, is strategically unsound because of a hidden asymmetry. We introduce a symmetric set of markup strategies for the sellers and show how it explains away the paradox of buyers’ advantage in three different double-sided market protocols.
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Bibliographic InfoPaper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 187.
Length: 15 pages
Date of creation: Jun 2009
Date of revision:
Publication status: Published in C. Hernandez, M. Posada and A. Lopez-Paredes (eds.), Artificial Economics, Springer, 2009, 81-92
market engineering; trading protocols; exchange market;
Find related papers by JEL classification:
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-23 (All new papers)
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