Which performs better under trader settings, double auction or uniform price auction?

Koji Kotani, Kenta Tanaka, Shunsuke Managi

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

A marketable permit system (MPS) has been suggested as a solution to environmental problems. Although the properties of MPSs under non-trader settings, in which each player is exclusively either a seller or a buyer, are well documented, little research has explored how MPSs perform under trader settings, in which each player can be both a seller and a buyer. We institute two auctions of trader settings in MPS experiments: a double auction (DA) and a uniform price auction (UPA). We then evaluate and compare their performances both with each other and with those under non-trader settings. The main results are as follows: DAs under trader settings perform much worse than do DAs under non-trader settings, whereas UPAs perform well, regardless of the trader and non-trader settings. UPAs are more efficient and generate more stable prices than do DAs under trader settings, and a considerable proportion of trades in DAs under trader settings consist of “flips” that could be considered speculation or errors. Thus, UPAs are likely to work better than DAs under trader settings.

Original languageEnglish
Pages (from-to)247-267
Number of pages21
JournalExperimental Economics
Volume22
Issue number1
DOIs
Publication statusPublished - Mar 15 2019

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Uniform price auction
Traders
Double auction
Marketable permits
Seller
Buyers
Speculation
Proportion
Experiment
Auctions

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance (miscellaneous)

Cite this

Which performs better under trader settings, double auction or uniform price auction? / Kotani, Koji; Tanaka, Kenta; Managi, Shunsuke.

In: Experimental Economics, Vol. 22, No. 1, 15.03.2019, p. 247-267.

Research output: Contribution to journalArticle

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