The Strategic Impact of Pace in Double Auction Bargaining
AbstractThis 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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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0304001.
Length: 36 pages
Date of creation: 04 Apr 2003
Date of revision:
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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Double auction; experimental economics; bounded rationality;
Other versions of this item:
- Steven Gjerstad, 2004. "The Strategic Impact of Pace in Double Auction Bargaining," Econometric Society 2004 North American Winter Meetings 190, Econometric Society.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-09 (All new papers)
- NEP-EXP-2003-04-09 (Experimental Economics)
- NEP-GTH-2003-04-09 (Game Theory)
- NEP-MIC-2003-04-10 (Microeconomics)
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.:
- Gjerstad, Steven & Dickhaut, John, 1998.
"Price Formation in Double Auctions,"
Games and Economic Behavior,
Elsevier, vol. 22(1), pages 1-29, January.
- 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.
- 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.
- Easley, David & Ledyard, John., . "Theories of Price Formation and Exchange in Double Oral Auctions," Working Papers 611, California Institute of Technology, Division of the Humanities and Social Sciences.
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