Zero intelligence in an Edgeworth box

Gode and Sunder (1993) brought a lower-bound to the literature on bounded rationality in the continuous double auction, asserting the institutional rules, rather than the behavior of traders, provide the equilibrating tendencies seen so often in the laboratory. Gode et al. (2004) brought these ‘zero intelligence’ traders to the general equilibrium paradigm as well, though not before a group of studies began questioning whether this new lower-bound was truly void of intelligence. This paper tests the driving assumptions of the general equilibrium adaptation of the zero intelligence model. I find significant variation in market performance when adjusting enforcement of five different assumptions. Enforcement of behavioral-oriented and market-oriented rules show stark differences in their influence on market outcomes, with behavioral-oriented rules providing the most guidance. 11Many thanks to Daniel Friedman for guidance and support, as well as comments and advice from Jacob Goeree, Bernardo Garcia-Pola, Natalia Lazzati, Kristian López Vargas, and members of the UCSC experimental and theoretical workshop BETE. I also greatly thank an anonymous associate editor and two anonymous referees for their helpful comments and feedback. Any errors are my own.