Abstract
Real market institutions, stock and commodity exchanges for example, do not occur in isolation. The same stocks and commodities may be listed on multiple exchanges, and traders who want to deal in those goods have a choice of markets in which to trade. While there has been extensive research into agent-based trading in individual markets, there is little work on this kind of multiple market scenario. Our work seeks to address this imbalance. In particular, this paper examines how allocative efficiency, the standard measure of a market’s ability to extract surplus, is affected by the presence of multiple markets for the same good. We find that while dividing traders between several small markets typically leads to lower efficiency than grouping them into one large market, the movement of traders between markets, and price incentives for changing markets, can reduce this loss of efficiency.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Berg, J., Forsythe, R., Nelson, F., Rietz, T.: Results from a dozen years of election futures markets research. In: Plott, C., Smith, V. (eds.) Handbook of Experimental Economic Results. Elsevier, Amsterdam (2001)
Bowling, M., Veloso, M.: Multiagent learning using a variable learning rate. Artificial Intelligence 136, 215–250 (2002)
Cliff, D.: Minimal-intelligence agents for bargaining behaviours in market-based environments. Technical Report HPL-97-91, Hewlett-Packard Research Laboratories (1997)
Cliff, D., Bruten, J.: Less than human: Simple adaptive trading agents for CDA markets. Technical Report HP-97-155, Hewlett-Packard Research Laboratories (1997)
Friedman, D.: The double auction institution: A survey. In: Friedman, D., Rust, J. (eds.) The Double Auction Market: Institutions, Theories and Evidence, pp. 3–25. Perseus Publishing, Cambridge (1993)
Gjerstad, S., Dickhaut, J.: Price formation in double auctions. Games and Economic Behavior 22, 1–29 (1998)
Gode, D.K., Sunder, S.: Allocative efficiency of markets with zero-intelligence traders: Market as a partial substitute for individual rationality. Journal of Political Economy 101(1), 119–137 (1993)
Klemperer, P.: How (not) to run auctions: The European 3G telecom auctions. European Economic Review 46, 829–845 (2002)
McMillan, J.: Reinventing the Bazaar: A Natural History of Markets. W. W. Norton & Company (2003)
Miller, M.H., Hawke, J.D., Malkiel, B., Scholes, M.: Findings of the Committee of Inquiry Examining the Events Surrounding (October 19, 1987); Technical report, Chicago Mercantile Exchange (Spring 1988)
Niu, J., Cai, K., Parsons, S., Sklar, E.: Reducing price fluctuation in continuous double auctions through pricing policy and shout improvement. In: Proceedings of the 5th International Conference on Autonomous Agents and Multi-Agent Systems, Hakodate, Japan (2006)
Niu, J., Cai, K., Parsons, S., Sklar, E.: Some preliminary results on competition between markets for automated traders. In: Proceedings of the Workshop on Trading Agent Design and Analysis, Vancouver, BC (2007)
Niu, J., McBurney, P., Gerding, E., Parsons, S.: Characterizing effective auction mechanisms: Insights from the 2007 tac market design competition. In: Proceedings of the 7th International Conference on Autonomous Agents and Multi-Agent Systems, Estoril, Portugal (2008)
Phelps, S., Parsons, S., McBurney, P.: An evolutionary game-theoretic comparison of two double auction markets. In: Faratin, P., RodrÃguez-Aguilar, J.A. (eds.) Agent Mediated Electronic Commerce VI: Theories for and Engineering of Distributed Mechanisms and Systems, pp. 101–114. Springer, Heidelberg (2004)
Roth, A.E., Erev, I.: Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term. Games and Economic Behavior 8, 164–212 (1995)
Rust, J., Miller, J.H., Palmer, R.: Characterizing effective trading strategies. Journal of Economic Dynamics and Control 18, 61–96 (1994)
Rustichini, A., Satterthwaite, M.A., Williams, S.R.: Convergence to efficiency in a simple market with incomplete information. Econometrica 62(5), 1041–1063 (1994)
Shah, A., Thomas, S.: David and Goliath: Displacing a primary market. Global Financial Markets 1(1), 14–21 (2000)
Smith, V.L.: An experimental study of competitive market behaviour. Journal of Political Economy 70(2), 111–137 (1962)
Smith, V.L.: Experimental auction markets and the Walrasian hypothesis. The Journal of Political Economy 73(4), 387–393 (1965)
Sutton, R.S., Barto, A.G.: Reinforcement learning: An introduction. MIT Press, Cambridge (1998)
Walia, V., Byde, A., Cliff, D.: Evolving market design in zero-intelligence trader markets. Technical Report HPL-2002-290, Hewlett-Packard Research Laboratories, Bristol, England (2003)
Walsh, W., Das, R., Tesauro, G., Kephart, J.O.: Analyzing complex strategic interactions in multi-agent systems. In: Proceedings of Workshop on Game-Theoretic and Decision-Theoretic Agents (2002)
Zhan, W., Friedman, D.: Markups in double auction markets. Technical report, LEEPS, Department of Economics, University of Santa Cruz (2005)
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2010 Springer-Verlag Berlin Heidelberg
About this paper
Cite this paper
Cai, K., Niu, J., Parsons, S. (2010). On the Economic Effects of Competition between Double Auction Markets. In: Ketter, W., La Poutré, H., Sadeh, N., Shehory, O., Walsh, W. (eds) Agent-Mediated Electronic Commerce and Trading Agent Design and Analysis. AMEC TADA 2008 2008. Lecture Notes in Business Information Processing, vol 44. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-15237-5_7
Download citation
DOI: https://doi.org/10.1007/978-3-642-15237-5_7
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-15236-8
Online ISBN: 978-3-642-15237-5
eBook Packages: Computer ScienceComputer Science (R0)