Symmetric Equilibria in Double Auctions with Markdown Buyers and Markup Sellers
Zhan and Friedman (2007) study double auctions where buyers and sellers are constrained to using simple markdown and markup rules. In spite of the alleged symmetry in roles and assumptions, buyers are shown to have the upper hand both in the call market and in the continuous double auction. We replicate the study and show that their formulation of the sellers’ markup strategies, while seemingly natural, is strategically unsound because of a hidden asymmetry. We introduce a symmetric set of markup strategies for the sellers and show how it explains away the paradox of buyers’ advantage in three different double-sided market protocols.
|Date of creation:||Jun 2009|
|Date of revision:|
|Publication status:||Published in C. Hernandez, M. Posada and A. Lopez-Paredes (eds.), Artificial Economics, Springer, 2009, 81-92|
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- Oliver Kirchkamp & J. Philipp Reiß, 2008. "Heterogeneous bids in auctions with rational and markdown bidders - Theory and Experiment," Jena Economic Research Papers 2008-066, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
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995, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Zhan, Wenjie & Friedman, Daniel, 2007. "Markups in double auction markets," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 2984-3005, September.
- Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
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