1 / 12

The Double Auction

The Double Auction. The Double Auction is like an “Econ Lab” to illustrate. How markets work How good the competitive equilibrium model (supply and demand) is as a model of a market Experimental economics An important branch of economic research today with many real world applications.

elton
Download Presentation

The Double Auction

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Double Auction

  2. The Double Auction is like an “Econ Lab” to illustrate • How markets work • How good the competitive equilibrium model (supply and demand) is as a model of a market • Experimental economics • An important branch of economic research today with many real world applications

  3. Key Features of a Double Auction • Both sellers and buyers call out prices • Buyers “bid” and sellers “ask” • Trading takes place during a trading period • A trade take place when • a buyer accepts a sellers ask • a seller accepts a buyers bid

  4. Buyers • each buyer has a “marginal benefit” table for the good • gain or reward is the difference between marginal benefit and the price • try to get a low price, but compete with other buyers • Any new bid must be higher than outstanding bid

  5. Sellers • each seller has a “marginal cost” schedule for the good • seller’s gain or reward is the difference between the price and the marginal cost • try to get a high price, but must compete with other sellers • Any new ask must be lower than outstanding ask

  6. Observe Actual Double Auction • Notice sellers and buyers first examine marginal costs and marginal benefits • During the trading period • Notice how bids, asks, and trades are posted on the board • Notice how the price changes during the trading period

More Related