scholarly journals Can Market Participants Report Their Preferences Accurately (Enough)?

2021 ◽  
Author(s):  
Eric Budish ◽  
Judd B. Kessler
Keyword(s):  
Design Theory ◽  
Competitive Equilibrium ◽  
Practical Implementation ◽  
Allocation Mechanism ◽  
Market Participants ◽  
Wharton School ◽  
Binary Choices ◽  
Ordinal Preference ◽  
Real Market ◽  
Complex Settings

In mechanism design theory it is common to assume that agents can perfectly report their preferences, even in complex settings in which this assumption strains reality. We experimentally test whether real market participants can report their real preferences for course schedules “accurately enough” for a novel course allocation mechanism, approximate competitive equilibrium from equal incomes (A-CEEI), to realize its theoretical benefits. To use market participants’ real preferences (i.e., rather than artificial “induced preferences” as is typical in market design experiments), we develop a new experimental method. Our method, the “elicited preferences” approach, generates preference data from subjects through a series of binary choices. These binary choices reveal that subjects prefer their schedules constructed under A-CEEI to their schedules constructed under the incumbent mechanism, a bidding points auction, and that A-CEEI reduces envy, suggesting subjects are able to report their preferences accurately enough to realize the efficiency and fairness benefits of A-CEEI. However, preference-reporting mistakes do meaningfully harm mechanism performance. One identifiable pattern of mistakes was that subjects had relatively more difficulty reporting cardinal as opposed to ordinal preference information. The experiment helped to persuade the Wharton School to adopt the new mechanism and helped guide aspects of its practical implementation, especially around preference reporting. This paper was accepted by Yan Chen, decision analysis.

Order-Book Modeling and Market Making Strategies

2018 ◽  
Vol 04 (01n02) ◽  
pp. 1950003
Author(s):  
Xiaofei Lu ◽  
Frédéric Abergel
Keyword(s):  
Optimal Strategies ◽  
Limit Order Book ◽  
Point Of View ◽  
Algorithmic Trading ◽  
Practical Implementation ◽  
Order Book ◽  
Theoretical Point ◽  
Market Making ◽  
Market Participants ◽  
Real Market

Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called “optimal strategies” however suffers from the failure of most order-book models to faithfully reproduce the behavior of real market participants. This paper is two-fold. First, some important statistical properties of order-driven markets are identified, advocating against the use of purely Markovian order-book models. Then, market making strategies are designed and their performances are compared, based on simulation as well as backtesting. We find that incorporating some simple non-Markovian features in the limit order book greatly improves the performances of market making strategies in a realistic context.

scholarly journals MARKET STATISTICS OF A PSYCHOLOGY-BASED HETEROGENEOUS AGENT MODEL

2008 ◽  
Vol 11 (07) ◽  
pp. 717-737 ◽  
Author(s):  
HARBIR LAMBA ◽  
TIM SEAMAN
Keyword(s):  
Heterogeneous Agent ◽  
Agent Based ◽  
Agent Model ◽  
Fundamental Parameters ◽  
Market Participants ◽  
Information Stream ◽  
Momentum Trading ◽  
Real Market ◽  
Available Information ◽  
Parameter Values

We continue an investigation into a class of agent-based market models that are motivated by a psychologically-plausible form of bounded rationality. Some of the agents in an otherwise efficient hypothetical market are endowed with differing tolerances to the tension caused by being in the minority. This herding tendency may be due to purely psychological effects, momentum-trading strategies, or the rational response to perverse marketplace incentives. The resulting model has the important properties of being both very simple and insensitive to its small number of fundamental parameters. While it is most certainly a caricature market, with only boundedly rational traders and the globally available information stream being modeled directly, other market participants and effects are indirectly replicated. We show that all of the most important "stylized facts" of real market statistics are reproduced by this model. Another useful aspect of the model is that, for certain parameter values, it reduces to a standard efficient-market system. This allows us to isolate and observe the effects of particular kinds of non-rationality. To this end, we consider the effects of different asymmetries in agent behavior and show that one in particular leads to skew statistics consistent with those seen in some real financial markets.

scholarly journals Regulating Fintech in the EU: the Case for a Guided Sandbox

2020 ◽  
Vol 11 (3) ◽  
pp. 604-629 ◽  
Author(s):  
Wolf-Georg RINGE ◽  
Christopher RUOF
Keyword(s):  
Business Models ◽  
Financial Regulation ◽  
Legal Framework ◽  
Business Practices ◽  
Eu Member States ◽  
Market Participants ◽  
New Business ◽  
Real Market ◽  
Regulatory Problems ◽  
The Eu

New financial technology holds the promise of innovation and competition, challenging established products and services and frequently improving market processes. However, regulation of these new services faces a double challenge: to keep pace with innovation and facilitate new market entries while at the same time understanding and managing the regulatory risks that are involved.At this stage, the existing EU regulatory framework is of little help: the bulk of the present body of financial regulation stems from a different time, with different regulatory problems in mind. EU regulation is also very slow to change and to adapt. Therefore, this paper proposes a regulatory “sandbox” – an experimentation space – as a step towards a regulatory environment where such new business models can thrive. A sandbox would allow market participants to test fintech services in the real market, with real consumers, but under the close scrutiny of the supervisor. The benefit of such an approach is that it fuels the development of new business practices and reduces the “time to market” cycle of financial innovation, while simultaneously safeguarding consumer protection. At the same time, a sandbox allows for mutual learning in a technical field which is sometimes poorly understood, both for firms and for the regulator. This would help to reduce the prevalent regulatory uncertainty for all market participants.In the particular EU legal framework with various layers of legal instruments, the implementation of such a sandbox is not straightforward. In this paper, we propose a “guided sandbox”, operated by the EU Member States, but with endorsement, support, and monitoring by EU institutions. This innovative approach would be somewhat uncharted territory for the EU, and thereby also contribute to the future development of EU financial market governance as a whole.

Reality-check and renewed challenges in earthquake engineering

2012 ◽  
Vol 45 (4) ◽  
pp. 137-160 ◽  
Author(s):  
Stefano Pampanin
Keyword(s):  
Seismic Performance ◽  
Earthquake Engineering ◽  
Design Theory ◽  
Damage Control ◽  
Low Cost ◽  
Modern Society ◽  
Cost Effective ◽  
Practical Implementation ◽  
Reality Check ◽  
General Terms

Earthquake Engineering is facing an extraordinarily challenging era, the ultimate target being set at increasingly higher levels by the demanding expectations of our modern society. The renewed challenge is to be able to provide low-cost, thus more widely affordable, high-seismic-performance structures capable of sustaining a design level earthquake with limited or negligible damage, minimum disruption of business (downtime) or, in more general terms, controllable socio-economical losses. The Canterbury earthquakes sequence in 2010-2011 has represented a tough reality check, confirming the current mismatch between societal expectations over the reality of seismic performance of modern buildings. In general, albeit with some unfortunate exceptions, modern multi-storey buildings performed as expected from a technical point of view, in particular when considering the intensity of the shaking (higher than new code design) they were subjected to. As per capacity design principles, plastic hinges formed in discrete regions, allowing the buildings to sway and stand and people to evacuate. Nevertheless, in many cases, these buildings were deemed too expensive to be repaired and were consequently demolished. Targeting life-safety is arguably not enough for our modern society, at least when dealing with new building construction. A paradigm shift towards damage-control design philosophy and technologies is urgently required. This paper and the associated presentation will discuss motivations, issues and, more importantly, cost-effective engineering solutions to design buildings capable of sustaining low-level of damage and thus limited business interruption after a design level earthquake. Focus will be given to the extensive research and developments in jointed ductile connections based upon controlled rocking & dissipating mechanisms for either reinforced concrete and, more recently, laminated timber structures. An overview of recent on-site applications of such systems, featuring some of the latest technical solutions developed in the laboratory and including proposals for the rebuild of Christchurch, will be provided as successful examples of practical implementation of performance-based seismic design theory and technology.

scholarly journals Möglichkeiten und Grenzen der Analyse von Holzmärkten

2012 ◽  
Vol 163 (10) ◽  
pp. 396-400 ◽  
Author(s):  
Roland Olschewski ◽  
Oliver Thees
Keyword(s):  
State Of The Art ◽  
Agent Based Modeling ◽  
Behavioural Economics ◽  
Future Market ◽  
Individual Behaviour ◽  
Agent Based ◽  
Market Participants ◽  
Real Market ◽  
The Individual ◽  
Forest Economic

Chances and limits of the analysis of wood markets Recent approaches of behavioural economics and agent-based modeling can enhance knowledge about market processes and results and widen the focus for the assessment of future market developments by emphasising the individual behaviour of market participants and scenario techniques. In this article we resume possible contributions of the particular approaches to better describe, explain and forecast real market developments. The exposition is based on state-of-the-art knowledge and reflects insights gained during the 8th Forest Economic Seminar in autumn 2011, where researchers and practitioners presented their findings.

scholarly journals Financial market infrastructure in Ukraine: consequences of legislative update

2021 ◽  
Vol 2021 (9) ◽  
pp. 70-98
Author(s):  
Natalia SHELUDKO ◽  
◽  
Stanislav SHISHKOV ◽  
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Legal Framework ◽  
Practical Implementation ◽  
Legal Basis ◽  
Active Involvement ◽  
Market Participants ◽  
Settlement Services ◽  
Money Transfers ◽  
Market Infrastructure

The defining principle of the effective functioning of the infrastructure of financial markets is a proper legal basis. It is emphasized that the general principles of infrastructure construction in the context of globalization should provide predictability, clarity and familiarity for international investors. This is most important for immature markets, where legal uncertainty, along with other objective difficulties in the functioning of the infrastructure, hinders the development and attraction of investment. The article notes the slow pace of modernization of the financial market infrastructure in Ukraine and the lack of significant progress in the implementation of international recommendations and proposals of foreign experts. In the course of the study of the updated Ukrainian legislation in the field of capital markets, its inconsistency with the legislation on payment systems and money transfers, inconsistency of terminology, lack of legal certainty, attribution of most fundamental issues to the regulator's discretion were substantiated. Legislative “innovations” of Law № 738-IX of 19.06.2020 are extremely destructive, and their practical implementation poses a threat to the integrity and operational landscape of the infrastructure of financial markets in Ukraine. It has been found that since the middle of 2021 a rather dubious form of cash settlements has been implemented, which revives the outdated inconvenient payment scheme and until 2023 preserves the monopolistic nature of clearing and settlement services, exposes stock market participants to legal and operational risks. It is stated that the Law does not follow the principles and recommendations developed in detail by international experts. The existence of preconditions in Ukraine for building a modern infrastructure of financial markets is substantiated, which requires a proper legal basis, which should be created taking into account the interests of market participants, active involvement of experts, quality implementation of European legal framework and international practices.

Designing interorganizational information systems for supply chain integration: a framework

2016 ◽  
Vol 27 (1) ◽  
pp. 71-94 ◽  
Author(s):  
Jouni Kauremaa ◽  
Kari Tanskanen
Keyword(s):  
Supply Chain ◽  
Information Systems ◽  
Design Theory ◽  
Design Principles ◽  
Supply Chain Integration ◽  
Practical Implementation ◽  
Interorganizational Information Systems ◽  
Content Type ◽  
Prior Literature ◽  
Technical Framework

Purpose – The purpose of this paper is to increase understanding on the essential managerial and technical decisions in the design of IOIS for supply chain integration (SCI). Toward this end, the authors elaborate on IOIS constructs in the SCI context, and propose a framework on the design of IOIS for SCI based on the current literature. Design/methodology/approach – The paper draws from prior literature on interorganizational information systems (IOISs) and supply chain management (SCM), and builds a conceptual framework that is illustrated by empirical examples from three case studies of a ten-year research program that focussed on e-business in SCM. Findings – Based on prior literature from several domains, the authors propose a framework, which combines the managerial viewpoints and the technical viewpoints for designing IOIS for SCI. The authors argue that these decisions form the basis for constructing three main elements of the IOIS for SCI design theory, namely, purpose and scope, design principles, and technical framework. Furthermore, the authors suggest that the real thread binding the decisions on all levels – purpose and scope; design principles; technical framework – is the flexible differentiation over use contexts, primarily over partners and focal interorganizational processes. Research limitations/implications – The key limitation of this work is the propositional nature of the advanced framework. However, the framework is strongly grounded in prior literature and is illustrated by examples from three empirical studies. Practical implications – The proposed framework provides a systematic tool for both the design and evaluation of the practical implementation of IOISs in SCI context. Furthermore, the results point explicitly to the implications of the benefits received from unilateral and bilateral modes of IOIS design. Originality/value – The synthesized framework and the observation of the requisite differentiation over use context complement prior work from multiple domains by discussing both managerial and technical questions of IOIS deployment within a single conceptualization.

scholarly journals Trading and Technology: An Information Systems Course Application

2021 ◽  
pp. 71-86
Author(s):  
Deniz Ozenbas ◽  
Michael S. Pagano ◽  
Robert A. Schwartz ◽  
Bruce W. Weber
Keyword(s):  
Value Chain ◽  
Price Setting ◽  
Market Outcomes ◽  
Market Participants ◽  
Clearing And Settlement ◽  
Real Market ◽  
Finance Theory ◽  
And Behavior ◽  
Analytical Frameworks ◽  
The Devil

AbstractFinancial markets today are highly computerized -- from software-driven order submission to price determination to straight-through clearing and settlement -- computer technology has displaced manual activities and streamlined functions throughout the trading value chain. The previous chapters examined microeconomic principles that underpin trading and price-setting, and finance theory that provides analytical frameworks for market outcomes. Our analysis introduces real market frictions and examines how transactions costs and heterogeneity among market participants makes market structure and tracing mechanism design crucial determinants of market outcomes and behavior. . In this chapter, we drill down further into the realities of a non-frictionless market in order to focus on how technology can enhance the efficiency of an actual marketplace. Challenging market design issues are encountered when developing and operating an actual trading facility, and as IT professionals know, the devil is in the details. The practical considerations in operating a market system successfully are the next topic this book addresses. 

scholarly journals Efficient multi-period distribution mechanism for the innovation investment system under uncertainty

2021 ◽  
Vol 295 ◽  
pp. 01058
Author(s):  
Alim Gurtuev ◽  
Elena Derkach ◽  
Anzor Sabanchiev
Keyword(s):  
Optimal Solution ◽  
External Evaluation ◽  
Allocation Mechanism ◽  
Subgame Perfect Nash Equilibrium ◽  
Limited Budget ◽  
Period Distribution ◽  
Innovation Projects ◽  
Binary Choices ◽  
Implementation Costs ◽  
Knowledge Asymmetry

In this paper, we study the problem of a venture investor who distributes the budget between several innovation projects under conditions of uncertainty. A common method for solving this problem is through bilateral negotiations with the external evaluation of projects. However, the effectiveness almost entirely depends on the evaluation quality, but external evaluation seldom reduces the knowledge asymmetry for innovation projects. We propose an iterative revelation mechanism for this problem when the investor sequentially offers possible allocations of the limited budget in the form of threshold dividing questions. The binary choices of innovators serve as a signal of internal estimates of the project implementation costs. Under perfect information, such a mechanism, regardless of the method for determining budget allocations, always produces an effective allocation in subgame-perfect Nash equilibrium. Under uncertainty, the method of offering distribution options matters – the optimal solution is found under the English auction class of mechanisms. In an efficient iterative allocation mechanism for innovation investment, the investor proposes a new allocation of the budget each round until an efficient allocation is achieved. The proposed mechanism does not necessarily need to identify the exact minimum budgets for each innovator. Another advantage of the proposed mechanism is the ability to use different processes for organizing rounds.

scholarly journals Ethnographic tourism as one of the factors of economic development of Lviv

2021 ◽  
pp. 102-107
Author(s):  
Inna Pakholok
Keyword(s):  
Economic Development ◽  
Economic Performance ◽  
Economic Benefits ◽  
Regional Level ◽  
Practical Implementation ◽  
Negative Effects ◽  
Museum Exhibits ◽  
Cultural Objects ◽  
Market Participants ◽  
Tourism Enterprises

Purpose. The aim of the article is the research of ethnographic tourism as one of the factors of economic development of Lviv in modern conditions. Methodology of research. The following methods are used in the study: analysis and comparison – in the study of economic indicators of tourism development in Lviv; logical assessment – in substantiating the recommendations for the development of ethnographic tourism at the regional level; generalization – in the process of formulating conclusions based on the results of the analysis. Findings. It is established that under the influence of the negative effects of coronavirus disease in Ukraine and around the world, it is necessary not only to register and preserve the past, but also to use it widely to attract tourists online. Under the current conditions of a number of restrictive measures, it is difficult for tourism market participants to provide economic benefits for enterprises. Therefore, it is necessary to find ways to solve this problem. It is proved that in the conditions of a pandemic the museums of Lviv occupy a special place among all available historical and cultural objects of ethnographic tourism and perform an important function for preservation of museum exhibits and their popularization in the market of tourist services. The following recommendations are proposed to improve the economic performance of Lviv tourism market participants: building an updated strategy for communication of tourism market participants with media, updating marketing programs for tourism market participants, development of special ethnographic tours, printing brochures of excursion routes in Lviv and Lviv region. Scientific novelty. Recommendations for the development of ethnographic tourism as one of the factors that will provide higher economic performance to participants in the tourism market at the regional level. Practical value. The practical implementation of the proposed measures will partially solve the economic problems of tourism enterprises and ensure a higher level of economic development of Lviv. Key words: ethnographic tourism, tourist market, tourists, historical and cultural objects, museums, visitors, Lviv, economic development, innovative approaches.

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