“The Asymptotics of Price and Strategy in the Buyer’s Bid Double Auction”
Coautoreado con Mark A. Satterthwaite y Konstantinos E. Zachariadis
Abstract: Solving for Bayesian-Nash equilibrium is complicated in most double auction models due to the multiplicity of traders and the asymmetry of behavior between buyers and sellers. In a model with correlated and interdependent values/costs, we identify the asymptotic limits of distributions in the first order conditions for optimal bidding/asking in the buyer’s bid double auction. Substitution of these asymptotic distributions into the first order conditions can in some cases permit the solution for approximately optimal bids/asks that provide insight into what is “first order” in a trader’s strategic decision-making. The effectiveness of the approximations along with several comparative statics predictions are then tested numerically.
Facultad de Ciencias Económicas y Administrativas UC
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