Order-Driven Markets are Almost Competitive. / Ritzberger, Klaus.

In: Review of Economic Studies, Vol. 83, No. 1, 01.2016, p. 338-364.

Research output: Contribution to journalArticlepeer-review

Published

Standard

Order-Driven Markets are Almost Competitive. / Ritzberger, Klaus.

In: Review of Economic Studies, Vol. 83, No. 1, 01.2016, p. 338-364.

Research output: Contribution to journalArticlepeer-review

Harvard

Ritzberger, K 2016, 'Order-Driven Markets are Almost Competitive', Review of Economic Studies, vol. 83, no. 1, pp. 338-364. https://doi.org/10.1093/restud/rdv031

APA

Vancouver

Author

Ritzberger, Klaus. / Order-Driven Markets are Almost Competitive. In: Review of Economic Studies. 2016 ; Vol. 83, No. 1. pp. 338-364.

BibTeX

@article{cbf43e592688413f9545aaef5e791179,
title = "Order-Driven Markets are Almost Competitive",
abstract = "This article studies a market game under uncertainty in which agents may submit multiple limit and market orders. When agents know their preferences at all states, the competitive equilibrium can be supported as a Nash equilibrium of the market game, that is, agents behave as if they were price takers. Therefore, if the associated competitive economy has a fully revealing rational expectations equilibrium, then so does the market game. This resolves the puzzle that agents behave as if prices were given, even though prices aggregate private information, at least for this “private values” case. Necessary conditions for Nash equilibrium show that the resulting allocation cannot deviate too far from a competitive equilibrium. When agents do not know their preferences at some states, though, a characterization result shows that the Nash equilibria of the market game tend to be far from competitive.",
author = "Klaus Ritzberger",
year = "2016",
month = jan,
doi = "10.1093/restud/rdv031",
language = "English",
volume = "83",
pages = "338--364",
journal = "Review of Economic Studies",
issn = "0034-6527",
publisher = "Oxford University Press",
number = "1",

}

RIS

TY - JOUR

T1 - Order-Driven Markets are Almost Competitive

AU - Ritzberger, Klaus

PY - 2016/1

Y1 - 2016/1

N2 - This article studies a market game under uncertainty in which agents may submit multiple limit and market orders. When agents know their preferences at all states, the competitive equilibrium can be supported as a Nash equilibrium of the market game, that is, agents behave as if they were price takers. Therefore, if the associated competitive economy has a fully revealing rational expectations equilibrium, then so does the market game. This resolves the puzzle that agents behave as if prices were given, even though prices aggregate private information, at least for this “private values” case. Necessary conditions for Nash equilibrium show that the resulting allocation cannot deviate too far from a competitive equilibrium. When agents do not know their preferences at some states, though, a characterization result shows that the Nash equilibria of the market game tend to be far from competitive.

AB - This article studies a market game under uncertainty in which agents may submit multiple limit and market orders. When agents know their preferences at all states, the competitive equilibrium can be supported as a Nash equilibrium of the market game, that is, agents behave as if they were price takers. Therefore, if the associated competitive economy has a fully revealing rational expectations equilibrium, then so does the market game. This resolves the puzzle that agents behave as if prices were given, even though prices aggregate private information, at least for this “private values” case. Necessary conditions for Nash equilibrium show that the resulting allocation cannot deviate too far from a competitive equilibrium. When agents do not know their preferences at some states, though, a characterization result shows that the Nash equilibria of the market game tend to be far from competitive.

U2 - 10.1093/restud/rdv031

DO - 10.1093/restud/rdv031

M3 - Article

VL - 83

SP - 338

EP - 364

JO - Review of Economic Studies

JF - Review of Economic Studies

SN - 0034-6527

IS - 1

ER -