Chapter 33 A Comparison of Market Institutions

This chapter summarizes a laboratory experiment comparing four different trading institutions, in a random values environment with four single unit buyers and four single unit sellers. This chapter also summarizes the main findings on efficiency: the continuous double auction (CDA) and high-frequency multiple-call market (MCM) are the most efficient institutions, followed by the low-frequency MCM and the single call market (SCM), with the implementation of uniform price double auction (UPDA) trailing the pack. This chapter also describes the main findings on transaction prices and volume. Price deviations from competitive equilibrium tend to be smallest in the SCM. Volume is highest in CDA, decreases with call frequency in MCM and SCM, and is lowest in UPDA. The body of this chapter describes the institutions, environment, performance measures, and results.