Satterthwaite, Mark
[Verfasser:in]
;
Williams, Steven R.
[Sonstige Person, Familie und Körperschaft];
Zachariadis, Konstantinos E.
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 22, 2020 erstellt
Beschreibung:
We devise a tractable model to study the buyer's bid double auction (BBDA) that allows correlated signals and interdependent values/costs. We demonstrate that simple, easily calculated equilibria exist in small markets. We prove that the incentive for strategic behavior vanishes at a O (1/η) rate where η is an index of the number of buyers and sellers. We then assume, consistent with numerical experiments and theoretical intuition, that this incentive drives trader's strategies to their limiting values at the same O (1/η) rate. Given this assumption, we prove rates of convergence to zero of (i) the inefficiency in the allocation, and (ii) the error in the market price as an estimate of the rational expectations price. These results together with our numerical experiments suggest that strategic behavior can be inconsequential even in small markets in its effect on allocational efficiency and information aggregation