Double auction markets with stochastic supply and demand schedules: Call markets and continuous auction trading mechanisms

Abstract

Performance under two different double auction trading mechanisms is investigated: a call market and a continuous double auction trading mechanism. Both auctions are two-sided, with several buyers and several sellers. A call market is a discrete trading mechanism in which buyers (sellers) submit a single bid (offer) in each trading period and the market clears according to well-defined rules of who trades and at what prices. In a continuous double auction, trades can occur at any time in the trading period, with buyers and sellers free to update unaccepted bids and offers continuously. Both trading mechanisms have wide applications in field settings, and have also been the subject of intense experimental study (see Holt, 1995, for a survey of experimental work).