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Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments

Pogorelskiy, Kirill and Plott, Charles R. (2015) Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments. Social Science Working Paper, 1404. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20160222-141654454

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Abstract

We study multiple-unit, laboratory experimental call markets in which orders are cleared by a single price at a scheduled “call”. The markets are independent trading “days” with two calls each day preceded by continuous and public order flow. Markets approach the competitive equilibrium over time. The price formation dynamics operate through the flow of bids and asks configured as the “jaws” of the order book with contract execution structured by an underlying mathematical principle, the Newton method for solving systems of equations. Thus, both excess demand and its slope play a systematic role in call market price discovery.


Item Type:Report or Paper (Working Paper)
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http://resolver.caltech.edu/CaltechAUTHORS:20171117-080555217Related ItemPublished Version
ORCID:
AuthorORCID
Pogorelskiy, Kirill0000-0002-3426-5870
Additional Information:We thank Skylar Cook and Megan Cutrofello, and other students in the Caltech experimental economics class who actively participated in this project in the beginning and contributed to the experimental design. We are grateful to Brian Merlob for helping us monitor the experimental sessions and recording the demonstration video. We express our warm thanks to Tim Cason, Stefano DellaVigna, David Eil, Dan Friedman, Ben Gillen, Dan Levin, Tibor Neugebauer, Stefan Palan, Tom Palfrey, Charles Sprenger, Rakesh Vohra, Bill Zame, and participants of the 2014 Santa Barbara Conference on Experimental and Behavioral Economics for useful comments. We acknowledge the financial support of the Caltech EEPS laboratory.
Group:Social Science Working Papers
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Funding AgencyGrant Number
Caltech Laboratory for Experimental Economics and Political ScienceUNSPECIFIED
Subject Keywords:call market, exchanges, experiments, order flow, dynamics, market jaws, market microstructure, Newton
Series Name:Social Science Working Paper
Issue or Number:1404
Classification Code:JEL codes: C92, D44, D47, D58, G14
Record Number:CaltechAUTHORS:20160222-141654454
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20160222-141654454
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:64646
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:25 Feb 2016 23:07
Last Modified:03 Oct 2019 09:39

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