Why do Biased Heuristics Approximate Bayes Rule in Double Auctions?

Jamal and Sunder (1996) showed that the median prices in double auctions populated by zero-intelligence (ZI) traders whose trading limits are set by two biased heuristics tend to converge to the same equilibrium as if their trading limits were set by applying Bayes' Rule. This note provides an analytical explanation of why the repeated use of biased heuristics approximates Bayes rule.

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Year of publication:	2001-06-07
Authors:	Sunder, Shyam NMI ; Jamal, Karim
Institutions:	School of Management, Yale University
Subject:	Aggregate Market Rationality \| Bayesian Equilibrium \| Double Auction \| Biased Heuristics

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Extent:	application/pdf
Series:	Yale School of Management Working Papers.
Type of publication:	Book / Working Paper
Classification:	C11 - Bayesian Analysis ; D44 - Auctions ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; A12 - Relation of Economics to Other Disciplines
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005587088