Copeland and Friedman [1987; 1991] provide useful background information on laboratory procedures and computerized double auction markets. Instructions for the current experiments are available on request.
To analyze the situation faced by traders as a game of incomplete information is a daunting task, particularly in the case of double auction markets (and clearinghouse markets with book [is greater than] 0) since continuous-time strategies then must be chosen.
In double auction markets, the difference between the best (lowest) ask and the best (highest) bid is recalculated every time either changes, and spread is the time-weighted average over the time when both bids and asks are present during a subperiod.(16) In some clearinghouse market clearings, there are no extramarginal bids or no extramarginal asks; in such cases spread is not defined.
Early studies of double auction markets for perishables (e.g., Smith ) noted that volume often tends to be heavier late in a trading period, even though buyers and sellers in a perishables environment typically have repetitively stationary known values so that there are no news events.
The fourth conclusion regarding double auction markets contradicts available theoretical analysis (Lindsey ).
DOUBLE AUCTION MARKETS DA1 NO NO 1:1 2.60 8 DA2 NO NO 1:1 6.10 8 DAX1 NO YES 2:1 7.70 11 DAX2 NO YES 2:1 4.45 11
In double auction markets, a rich public information set is generated as both buyers and sellers enter and accept publicly displayed price quotes within trading periods.
Examination of the four double auction experiments in Figure 2 reveals that our double auction markets generated price deviations of approximately the same magnitude as HLV.
This result parallels HLV's finding for double auction markets in the SMP design.
Posted offer and double auction markets do not perform identically in this design, however.