scholarly journals Efficient Allocations in Double Auction Markets

2021 ◽  
Author(s):  
Teemu Pennanen
Keyword(s):  
Pareto Frontier ◽  
Invisible Hand ◽  
Double Auction ◽  
Descriptive Model ◽  
Auction Markets ◽  
Double Auctions ◽  
Limit Orders ◽  
Finite Set ◽  
Classical Models ◽  
Efficient Allocations

This paper proposes a simple descriptive model of discrete-time double auction markets for divisible assets. As in the classical models of exchange economies, we consider a finite set of agents described by their initial endowments and preferences. Instead of the classical Walrasian-type market models, however, we assume that all trades take place in a centralized double auction where the agents communicate through sealed limit orders for buying and selling. We find that, under nonstrategic bidding, double auction clears with zero trades precisely when the agents’ current holdings are on the Pareto frontier. More interestingly, the double auctions implement Adam Smith’s “invisible hand” in the sense that, when starting from disequilibrium, repeated double auctions lead to a sequence of allocations that converges to individually rational Pareto allocations.

Fuzzy logic-based bidding strategies in dynamic double auctions

Kybernetes ◽  
2019 ◽  
Vol 48 (3) ◽  
pp. 612-635
Author(s):  
Baki Unal ◽  
Çagdas Hakan Aladag
Keyword(s):  
Fuzzy Logic ◽  
Bidding Strategy ◽  
Double Auction ◽  
Auction Markets ◽  
Content Type ◽  
Bidding Strategies ◽  
Double Auctions ◽  
Inference Systems ◽  
Zero Intelligence ◽  
Logic Inference

Purpose Double auctions are widely used market mechanisms on the world. Communication technologies such as internet increased importance of this market institution. The purpose of this study is to develop novel bidding strategies for dynamic double auction markets, explain price formation through interactions of buyers and sellers in decentralized fashion and compare macro market outputs of different micro bidding strategies. Design/methodology/approach In this study, two novel bidding strategies based on fuzzy logic are presented. Also, four new bidding strategies based on price targeting are introduced for the aim of comparison. The proposed bidding strategies are based on agent-based computational economics approach. The authors performed multi-agent simulations of double auction market for each suggested bidding strategy. For the aim of comparison, the zero intelligence strategy is also used in the simulation study. Various market outputs are obtained from these simulations. These outputs are market efficiencies, price means, price standard deviations, profits of sellers and buyers, transaction quantities, profit dispersions and Smith’s alpha statistics. All outputs are also compared to each other using t-tests and kernel density plots. Findings The results show that fuzzy logic-based bidding strategies are superior to price targeting strategies and the zero intelligence strategy. The authors also find that only small number of inputs such as the best bid, the best ask, reference price and trader valuations are sufficient to take right action and to attain higher efficiency in a fuzzy logic-based bidding strategy. Originality/value This paper presents novel bidding strategies for dynamic double auction markets. New bidding strategies based on fuzzy logic inference systems are developed, and their superior performances are shown. These strategies can be easily used in market-based control and automated bidding systems.

scholarly journals Bidding in Smart Grid PDAs: Theory, Analysis and Strategy

2020 ◽  
Vol 34 (02) ◽  
pp. 1974-1981
Author(s):  
Susobhan Ghosh ◽  
Sujit Gujar ◽  
Praveen Paruchuri ◽  
Easwar Subramanian ◽  
Sanjay Bhat
Keyword(s):  
Smart Grids ◽  
Complete Information ◽  
Equilibrium Analysis ◽  
Equilibrium Strategy ◽  
Double Auction ◽  
Single Shot ◽  
Wholesale Market ◽  
Bidding Strategies ◽  
Double Auctions ◽  
Best Response

Periodic Double Auctions (PDAs) are commonly used in the real world for trading, e.g. in stock markets to determine stock opening prices, and energy markets to trade energy in order to balance net demand in smart grids, involving trillions of dollars in the process. A bidder, participating in such PDAs, has to plan for bids in the current auction as well as for the future auctions, which highlights the necessity of good bidding strategies. In this paper, we perform an equilibrium analysis of single unit single-shot double auctions with a certain clearing price and payment rule, which we refer to as ACPR, and find it intractable to analyze as number of participating agents increase. We further derive the best response for a bidder with complete information in a single-shot double auction with ACPR. Leveraging the theory developed for single-shot double auction and taking the PowerTAC wholesale market PDA as our testbed, we proceed by modeling the PDA of PowerTAC as an MDP. We propose a novel bidding strategy, namely MDPLCPBS. We empirically show that MDPLCPBS follows the equilibrium strategy for double auctions that we previously analyze. In addition, we benchmark our strategy against the baseline and the state-of-the-art bidding strategies for the PowerTAC wholesale market PDAs, and show that MDPLCPBS outperforms most of them consistently.

Minimal Intelligence Agents in Double Auction Markets with Speculators

2011 ◽  
pp. 79-98
Author(s):  
Senlin Wu ◽  
Siddhartha Bhattacharyya
Keyword(s):  
Market Efficiency ◽  
Double Auction ◽  
Sufficient Condition ◽  
Agent Based Model ◽  
Market Conditions ◽  
Market Prices ◽  
Auction Markets ◽  
Agent Based ◽  
Auction Market

This chapter explores the minimal intelligence conditions for traders in a general double auction market with speculation activities. Using an agent-based model, it is shown that when traders and speculators play together under general market curve settings, zero-intelligent plus (ZIP) is still a sufficient condition for market prices to converge to the equilibrium. At the same time, market efficiency is lowered as the number of speculators increase. The experiments demonstrate that the equilibrium of a double auction market is an interactive result of the intelligence of the traders and other factors such as the type of the players and market conditions. This research fills in an important gap in the literature, and strengthens Cliff and Bruten’s (1997) declaration that zero is not enough for a double auction market.

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