IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v294y2001i3p447-464.html

Bid distributions of competing agents in simple models of auctions

Author

Listed:
  • D'Hulst, R.
  • Rodgers, G.J.

Abstract

Models of auctions or tendering processes are introduced. In every round of bidding the players select their bid from a probability distribution and whenever a bid is unsuccessful, it is discarded and replaced. For simple models, the probability distributions evolve to a stationary power law with the exponent dependent only on the number of players. For most situations, the system converges towards a state where all players are identical. A number of variations of this model are introduced and the application of these models to the dynamics of market makers is discussed. The effect of price uncertainty on bid distributions is presented. An underlying market structure generates heterogenous agents which do not have power law bid distribution in general.

Suggested Citation

  • D'Hulst, R. & Rodgers, G.J., 2001. "Bid distributions of competing agents in simple models of auctions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 294(3), pages 447-464.
    • Handle: RePEc:eee:phsmap:v:294:y:2001:i:3:p:447-464
    DOI: 10.1016/S0378-4371(01)00128-5
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437101001285
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/S0378-4371(01)00128-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Cohen, Kalman J. & Maier, Steven F. & Schwartz, Robert A. & Whitcomb, David K., 1979. "Market Makers and the Market Spread: A Review of Recent Literature," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(4), pages 813-835, November.
    2. George, Thomas J. & Longstaff, Francis A., 1993. "Bid-Ask Spreads and Trading Activity in the S&P 100 Index Options Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(3), pages 381-397, September.
    3. Wahal, Sunil, 1997. "Entry, Exit, Market Makers, and the Bid-Ask Spread," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 871-901.
    4. Challet, D. & Zhang, Y.-C., 1997. "Emergence of cooperation and organization in an evolutionary game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 407-418.
    5. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    6. Bak, P. & Paczuski, M. & Shubik, M., 1997. "Price variations in a stock market with many agents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 430-453.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Yunyi & Gong, Pu, 2018. "IPV model with Cobb–Douglas and reference-dependent utility functions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 121-131.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kaizoji, Taisei & Bornholdt, Stefan & Fujiwara, Yoshi, 2002. "Dynamics of price and trading volume in a spin model of stock markets with heterogeneous agents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 316(1), pages 441-452.
    2. J. Doyne Farmer, 2002. "Market force, ecology and evolution," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(5), pages 895-953, November.
    3. Gu, Gao-Feng & Chen, Wei & Zhou, Wei-Xing, 2008. "Empirical regularities of order placement in the Chinese stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(13), pages 3173-3182.
    4. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frédéric Abergel, 2011. "Econophysics review: II. Agent-based models," Post-Print hal-00621059, HAL.
    5. Troy Tassier, 2013. "Handbook of Research on Complexity, by J. Barkley Rosser, Jr. and Edward Elgar," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 39(1), pages 132-133.
    6. Jean-Philippe Bouchaud & Matteo Marsili & Jean-Pierre Nadal, 2023. "Application of spin glass ideas in social sciences, economics and finance," Papers 2306.16165, arXiv.org.
    7. Owhadi, Houman, 2004. "From a market of dreamers to economical shocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 583-602.
    8. Kazuto Sasai & Yukio-Pegio Gunji & Tetsuo Kinoshita, 2017. "Intermittent Behavior Induced By Asynchronous Interactions In A Continuous Double Auction Model," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 20(02n03), pages 1-21, March.
    9. Daniel Fricke & Thomas Lux, 2015. "The effects of a financial transaction tax in an artificial financial market," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(1), pages 119-150, April.
    10. Horvath, Philip A. & Roos, Kelly R. & Sinha, Amit, 2016. "An Ising spin state explanation for financial asset allocation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 445(C), pages 112-116.
    11. Antonio Doria, Francisco, 2011. "J.B. Rosser Jr. , Handbook of Research on Complexity, Edward Elgar, Cheltenham, UK--Northampton, MA, USA (2009) 436 + viii pp., index, ISBN 978 1 84542 089 5 (cased)," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1-2), pages 196-204, April.
    12. Chen, Yunong & Belmonte, Andrew & Griffin, Christopher, 2021. "Imitation of success leads to cost of living mediated fairness in the Ultimatum Game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 583(C).
    13. Anindya S. Chakrabarti & Diptesh Ghosh, 2019. "Emergence of anti-coordination through reinforcement learning in generalized minority games," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(2), pages 225-245, June.
    14. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2025. "Assessing the Energy-Efficiency Gap," World Scientific Book Chapters, in: Economics of Environment, Climate Change, and Wine Selected Papers of Robert N Stavins Volume 3 (2011–2023), chapter 4, pages 53-118, World Scientific Publishing Co. Pte. Ltd..
    15. Yousaf, Imran & Youssef, Manel & Goodell, John W., 2022. "Quantile connectedness between sentiment and financial markets: Evidence from the S&P 500 twitter sentiment index," International Review of Financial Analysis, Elsevier, vol. 83(C).
    16. Michel S. Zouboulakis & John Kamarianos, 2002. "Racionalidad y cooperación entre firmas. Examen del comportamiento habitual de las industrias griegas," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 4(7), pages 98-113, July-Dece.
    17. Sanstad, Alan H. & DeCanio, Stephen J. & Boyd, Gale A. & Koomey, Jonathan G., 2001. "Estimating bounds on the economy-wide effects of the CEF policy scenarios," Energy Policy, Elsevier, vol. 29(14), pages 1299-1311, November.
    18. Qiu, Jiaping & Yu, Fan, 2012. "Endogenous liquidity in credit derivatives," Journal of Financial Economics, Elsevier, vol. 103(3), pages 611-631.
    19. Dohmen, Thomas & Falk, Armin & Huffman, David & Marklein, Felix & Sunde, Uwe, 2009. "Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 903-915, December.
    20. Madureira, Leonardo & Underwood, Shane, 2008. "Information, sell-side research, and market making," Journal of Financial Economics, Elsevier, vol. 90(2), pages 105-126, November.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:294:y:2001:i:3:p:447-464. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.