Tracking the invisible hand: Convergence of double auctions to competitive equilibrium

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Computational Economics, 16, 2000, pp. 257-284
To cite or link this document: Bosch-Domènech, Antoni Sunder, Shyam
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 1996-06-01
dc.identifier.citation Computational Economics, 16, 2000, pp. 257-284
dc.description.abstract Economics is the science of want and scarcity. We show that want and scarcity, operating within a simple exchange institution (double auction), are sufficient for an economy consisting of multiple inter--related markets to attain competitive equilibrium (CE). We generalize Gode and Sunder's (1993a, 1993b) single--market finding to multi--market economies, and explore the role of the scarcity constraint in convergence of economies to CE. When the scarcity constraint is relaxed by allowing arbitrageurs in multiple markets to enter speculative trades, prices still converge to CE, but allocative efficiency of the economy drops. \\ Optimization by individual agents, often used to derive competitive equilibria, are unnecessary for an actual economy to approximately attain such equilibria. From the failure of humans to optimize in complex tasks, one need not conclude that the equilibria derived from the competitive model are descriptively irrelevant. We show that even in complex economic systems, such equilibria can be attained under a range of surprisingly weak assumptions about agent behavior.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 91
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Tracking the invisible hand: Convergence of double auctions to competitive equilibrium
dc.type info:eu-repo/semantics/workingPaper 2014-06-03T07:13:47Z
dc.subject.keyword Microeconomics
dc.subject.keyword competitive model
dc.subject.keyword equilibrium
dc.subject.keyword double auction
dc.subject.keyword experimental economics
dc.subject.keyword leex
dc.rights.accessRights info:eu-repo/semantics/openAccess

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