They consider three different market microstructures: 1) a continuous, oral double auction market
; 2) a call market followed by a continuous market; and 3) a pre-opening period followed by a call market and then a continuous market.
He derives necessary conditions for a Bayesian Nash (sequential) equilibrium which imply some inefficiency in a simple double auction market, but at worst only a few of the least valuable trades are missed.
Zabel  argues that a dynamically optimizing trader with sole posting privileges in a double auction market may stabilize transaction prices relative to clearinghouse clearing prices, but some authors (e.g., Cohen et al.
Thus one obtains a price forecast for every subperiod (i.e., every time interval between news events or beginning or end of the trading period) of a double auction market and for every clearing in a clearinghouse market.
For example, if there were two transactions at prices $1.00 and $1.10 in a subperiod of a double auction market with rational expectations price (fundamental value) $1.20, then RMSE = [(1/2 ([20.sup.2] + [10.sup.2])).sup.1/2] [approximately equal to] 15.8.(15) In a clearinghouse clearing, the root mean squared deviation reduces to the absolute difference between the clearing price and the rational expectations price.
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.
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.