Paper #91

Título:

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

Autores:

Antoni Bosch-Domènech y Shyam Sunder

Fecha:

Junio 1996

Resumen:

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.

Palabras clave:

Competitive model, equilibrium, double auction, experimental economics, Leex

Códigos JEL:

C92, D40, D44

Área de investigación:

Microeconomía

Publicado en:

Computational Economics, 16, 2000, pp. 257-284

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