Evolution of markets: a simulation with centralized, decentralized and posted offer formats

Olga A. Rud, Jean Paul Rabanal

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

We apply standard evolutionary dynamics to study trader participation in three competing market formats —call market (CM), posted offer (PO) and decentralized market (DM). In our framework, heterogeneous buyers and sellers seek to transact a homogeneous good, which can be done by allocating their time among three different market formats. Our results show that (i) the final participation of traders in the CM is much higher, (ii) the PO can coexist with the CM, (iii) the DM unravels when competing against CM and (iv) the DM can coexist with the PO, depending on the initial participation conditions. Thus, we demonstrate that agent-based micro-simulations coupled with replication dynamics can reproduce most of the previously known theoretical results and have the potential to investigate other commonly used hybrid auction protocols.

Original languageEnglish
Pages (from-to)667-689
Number of pages23
JournalJournal of Evolutionary Economics
Volume28
Issue number3
DOIs
Publication statusPublished - 1 Aug 2018
Externally publishedYes

Keywords

  • Centralized markets
  • Decentralized bargaining
  • Decentralized markets
  • Evolutionary dynamics
  • Market design
  • Market formation

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