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The Strategic Impact of Pace in Double Auction Bargaining

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Author Info
Steven Gjerstad (University of Arizona)

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Abstract

This paper evaluates performance of human subjects and instances of a bidding model that interact in continuous ­time double auction experiments. Asks submitted by instances of the seller model (``automated sellers'') maximize the seller's expected surplus relative to a heuristic belief function, and arrive stochastically according to an exponential distribution. Automated buyers are similar. Across experiment sessions we vary the exponential distribution parameters of automated sellers and buyers in order to assess the impact of the relative pace of asks and bids on the performance of both human subjects and the automated sellers and buyers. In these experiments, prices converge and allocations converge to efficiency, yet the split of surplus typically differs significantly from the equilibrium split. In order to evaluate the impact of pace, a statistical model is developed in which the relative performance of sellers to buyers is examined as a function of the profile of types present in each experiment session. This econometric model demonstrates that (1) human buyers outperform human sellers, (2) automated sellers and buyers with a longer expected time between asks or bids outperform faster automated sellers and buyers, and (3) the performance of the faster automated buyers is comparable to that of human buyers.

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File URL: http://129.3.20.41/eps/mic/papers/0304/0304001.pdf
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Publisher Info
Paper provided by EconWPA in its series Microeconomics with number 0304001.

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Length: 36 pages
Date of creation: 04 Apr 2003
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Handle: RePEc:wpa:wuwpmi:0304001

Note: Type of Document - PDF (from LaTeX ); prepared with MikTeX on IBM PC; to print on HP/PostScript/; pages: 36 ; figures: included
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Related research
Keywords: Double auction; experimental economics; bounded rationality;

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Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

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References listed on IDEAS
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  1. Gjerstad, Steven & Dickhaut, John, 1998. "Price Formation in Double Auctions," Games and Economic Behavior, Elsevier, vol. 22(1), pages 1-29, January. [Downloadable!] (restricted)
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  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. [Downloadable!] (restricted)
  3. Cason, Timothy N. & Friedman, Daniel, 1996. "Price formation in double auction markets," Journal of Economic Dynamics and Control, Elsevier, vol. 20(8), pages 1307-1337, August. [Downloadable!] (restricted)
    Other versions:
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