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Efficient Allocations in Double Auction Markets

This paper proposes a simple descriptive model of discrete-time double auction markets for divisible assets. As in the classical models of exchange economies, we consider a finite set of agents described by their initial endowments and preferences. Instead of the classical Walrasian-type market models, however, we assume that all trades take place in a centralized double auction where the agents communicate through sealed limit orders for buying and selling. We find that, under nonstrategic bidding, double auction clears with zero trades precisely when the agents’ current holdings are on the Pareto frontier. More interestingly, the double auctions implement Adam Smith’s “invisible hand” in the sense that, when starting from disequilibrium, repeated double auctions lead to a sequence of allocations that converges to individually rational Pareto allocations.

Ketersediaan

Informasi Detail

Judul Seri

MATHEMATICS OF OPERATIONS RESEARCH; Vol.47 No.2 May 2022

No. Panggil

-

Penerbit

: .,

Deskripsi Fisik

p. 1648-1663

Bahasa

English

ISBN/ISSN

-

Klasifikasi

NONE

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

CONVERGENCE
DOUBLE AUCTION
PRICE FORMATION
PARETO ALLOCATION

Info Detail Spesifik

https://doi.org/10.1287/moor.2021.1182

Pernyataan Tanggungjawab

Teemu Pennanen

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