The Alternating Double Auction Market: A Game Theoretic and by Abdolkarim Sadrieh

By Abdolkarim Sadrieh

The alternating double public sale industry establishment is gifted as a discrete time model of the open outcry marketplace. the sport in vast shape is analyzed in a virtually ideal details atmosphere, utilizing the idea that of subgame perfectness. by means of making use of new equilibrium choice standards, a common lifestyles result's bought for "impatience equilibria" of the sport. All such equilibria are proven to have specific houses about the traded amounts and costs. crucial effects are that the equilibrium costs are self sustaining of the variety of investors and are constantly very as regards to - if no longer within - the variety of aggressive costs. The latter could be evaluated as video game theoretic help for the convergence of costs to the aggressive fee. the method of cost formation is traced through utilising the educational course concept and introducing the "anchor rate hypothesis".

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The number of total traders on each market side, however, can be unequal, since an arbitrary number of extra-marginal traders can be present on each market side of an m-trade market. 1. is the maximum possible number of contracts that can be made in the subgame. ). , after a trade occurs. Note that the analogous is not true with m-trade markets: an m-trade market may convert into another (smaller) m-trade market, with less traders in total, but the same number m of non-extra-marginal traders. For example, consider a I-trade market with an extra-marginal trader on each market side trades.

Game Theoretic AnaLysis Nevertheless, we will show in the following sections, that it suffices for the analysis to know that the second market phase reached is of the same type as G2(c2,v2)' In other words, the information concerning the market clearing price range separates the classes of second market phase subgames in the example above sufficiently. In fact, sometimes we will not even need to examine both of the innermost valuations in the (t+ I)-the market phase subgame. ), if only the upper innermost valuation p* or the lower innermost valuation p*, correspondingly, is decisive for the analysis.

B. Definitions and Lemmas 41 strategy combination X I(I I,M) of the market side M induced by X on the game segment I' enforces the price p. e. only if the segment strategy x'Tj(I') of T j specifies accepting the price p in some decision stage of I' that is reached before market period termination. Proof of Corollary 1 The proof follows immediately from Lemma 4. Since X(M) can be a market side best reply combination, only if at least one of the traders on the market side M chooses a strategy which prescribes trading at p in I' and since T j is the only trader who can do so, X(M) can be a market side best reply combination, only if T j accepts p in some decision stage of I' before market period termination.

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