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(Topic 3) MARKET EFFICIENCY - DOUBLE AUCTION EXPERIMENT - Coggle Diagram
(Topic 3)
MARKET EFFICIENCY - DOUBLE AUCTION EXPERIMENT
Actors
SELLERS
receives a COST SCHEDULE
Earnings = Price Received - Cost
BUYERS
receives a VALUE SCHEDULE
Earnings = Resale Cost - Price Paid
Mechanisms
BID-ASK
SELLERS submits...
ASKS
BUYERS submits...
BIDS
BID-ASK SPREAD
Ability of Double Auction: generating...
Competitive Equilibrium Price
Why the Double Auction works so well?
Incentive Compatibility
Competitive Pressure
Information Aggregation
Adaptive Learning
Market coordinates decentralized information through it :warning:
Welfare & Market Efficiency
SOCIAL SURPLUS
Total Surplus=∑(Resale Values)−∑(Production Costs)
Allocative Efficiency
all mutually beneficial trades occur
total surplus is maximized
deadweight loss is minimized
Competitive equilibrium is efficient because:
MB = MC