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  3. American Economic Journal: Microeconomics
  4. November 2017
  5. Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments

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

  • Charles R. Plott
  • Kirill Pogorelskiy
American Economic Journal: Microeconomics
vol. 9, no. 4, November 2017
(pp. 1-41)
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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 a 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 featuring elements of an underlying mathematical principle, the Newton-Raphson method for solving systems of equations. Both excess demand and its slope play a systematic role in call market price discovery.

Citation

Plott, Charles R., and Kirill Pogorelskiy. 2017. "Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments." American Economic Journal: Microeconomics, 9 (4): 1-41. DOI: 10.1257/mic.20150201

Additional Materials

JEL Classification

  • C92 Design of Experiments: Laboratory, Group Behavior
  • D41 Market Structure, Pricing, and Design: Perfect Competition
  • D44 Auctions
  • G14 Information and Market Efficiency; Event Studies; Insider Trading
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