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Do traders strategically time their pledges during real-world Walrasian auctions?

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  • Eaves, James
  • Williams, Jeffrey
  • Power, Gabriel J.

Abstract

Experimental research suggests the Walrasian tâtonnement auction encourages traders to under-reveal preferences, even encouraging initial pledges contrary to true desires, because pledges are not binding. We analyze the timing and characteristics of individual pledges and trades during 9604 auctions for redbeans conducted by the Tokyo Grain Exchange. We find no evidence of contrarian pledging and little evidence of under-revelation – as many traders over-reveal as under-reveal. Most traders pledge seriously from the beginning. Despite the considerable heterogeneity in pledging behavior across individual traders, these differences appear to have no relationship with traders’ profits, nor do they appear to affect the achievement of equilibrium.

Suggested Citation

  • Eaves, James & Williams, Jeffrey & Power, Gabriel J., 2016. "Do traders strategically time their pledges during real-world Walrasian auctions?," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 109-118.
    • Handle: RePEc:eee:jbfina:v:71:y:2016:i:c:p:109-118
    DOI: 10.1016/j.jbankfin.2016.04.018
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    More about this item

    Keywords

    Auction; Strategic bidding; Market microstructure; Tâtonnement; Tokyo Grain Exchange;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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