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Zero-Intelligence Trading without Resampling

  • Marco LiCalzi

    ()

    (Department of Applied Mathematics, University of Venice)

  • Paolo Pellizzari

    ()

    (Department of Applied Mathematics, University of Venice)

This paper studies the consequences of removing the resampling assumption from the zero-intelligence trading model in Gode and Sunder (1993). We obtain three results. First, individual rationality is no longer sufficient to attain allocative effciency in a continuous double auction; hence, the rules of the market matter. Second, the allocative effciency of the continuous double auction is higher than for other sequential protocols both with or without resampling. Third, compared to zero intelligence, the effect of learning on allocative effciency is sharply positive without resampling and mildly negative with resampling.

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File URL: http://virgo.unive.it/wpideas/storage/2008wp164.pdf
File Function: First version, 2008
Download Restriction: no

Paper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 164.

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Length: 13 pages
Date of creation: May 2008
Date of revision:
Publication status: Published in K. Schredelseker and F. Hauser (eds.), Complexity and Artificial Markets, Springer, 2008, 3-14
Handle: RePEc:vnm:wpaper:164
Contact details of provider: Postal: Dorsoduro, 3825/E, 30123 Venezia
Phone: ++39 041 2346910-6911
Fax: ++ 39 041 5221756
Web page: http://www.dma.unive.it/

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  1. Hurwicz, Leonid & Radner, Roy & Reiter, Stanley, 1975. "A Stochastic Decentralized Resource Allocation Process: Part I," Econometrica, Econometric Society, vol. 43(2), pages 187-221, March.
  2. Marco LiCalzi & Paolo Pellizzari, 2006. "Simple Market Protocols for Efficient Risk Sharing," Working Papers 136, Department of Applied Mathematics, Università Ca' Foscari Venezia.
  3. Steven Gjerstad & John Dickhaut, 2003. "Price Formation in Double Auctions," Microeconomics 0302001, EconWPA.
  4. 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.
  5. Steven Gjerstad & Jason M. Shachat, 2007. "Individual Rationality and Market Efficiency," Purdue University Economics Working Papers 1204, Purdue University, Department of Economics.
  6. Marco LiCalzi & Paolo Pellizzari, 2006. "The allocative effectiveness of market protocols under intelligent trading," Working Papers 134, Department of Applied Mathematics, Università Ca' Foscari Venezia.
  7. Paul Brewer & Maria Huang & Brad Nelson & Charles Plott, 2002. "On the Behavioral Foundations of the Law of Supply and Demand: Human Convergence and Robot Randomness," Experimental Economics, Springer, vol. 5(3), pages 179-208, December.
  8. Marco LiCalzi & Paolo Pellizzari, 2007. "Which market protocols facilitate fair trading?," Working Papers 151, Department of Applied Mathematics, Università Ca' Foscari Venezia.
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