IEL-CDA model: A more accurate theory of behavior in continuous double auctions

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F25%3A10257128" target="_blank" >RIV/61989100:27510/25:10257128 - isvavai.cz</a>
Result on the web
<a href="https://www.sciencedirect.com/science/article/pii/S0165188924000320?via%3Dihub" target="_blank" >https://www.sciencedirect.com/science/article/pii/S0165188924000320?via%3Dihub</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.jedc.2024.104840" target="_blank" >10.1016/j.jedc.2024.104840</a>

Result language
angličtina
Original language name
IEL-CDA model: A more accurate theory of behavior in continuous double auctions
Original language description
The continuous double auction (CDA) is a well-studied and widely used trading institution. However, there is no universally accepted theory regarding the dynamics of price formation, especially within the first period, that has endured experimental testing. In this paper, we introduce a behavioral model called IEL-CDA, which builds upon the Individual Evolutionary Learning (IEL) model of Arifovic et al. (2022). We enhance IEL by (a) incorporating Marshallian Selection, favoring traders with a higher expected surplus in making offers, and (b) allowing a trader's hypothetical reasoning to depend on the history of transactions. Using new experimental data, we test the hypothesis that efficiencies and average prices observed in the experiments follow the same distribution as those produced by simulations with various models. The hypothesis is rejected for both the Zero Intelligent theory of Gode and Sunder (1993) and IEL; however, it is not rejected for IEL-CDA. Therefore, IEL-CDA emerges as a more accurate theory of behavior in the continuous double auction.
Czech name
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Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50202 - Applied Economics, Econometrics

Project
<a href="/en/project/GA22-28882S" target="_blank" >GA22-28882S: Interaction between Financial Markets and Real Sector: Modeling, Experiments, and Policy</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2025
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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