Price Dynamics in a Double Auction Market with Many Securities and Money: A Simulation Study

Abstract

This thesis is devoted to the study of whether or not a traditional double auction trading process in a model with many securities and money can converge to a general equilibrium price. In addition to the traditional presumption of double auction markets we assume in several experiments that artificial subjects with least rationality buy or sell such that their utility never decrease and choose calling prices randomly from a certain possible range which is given by the past history of calling prices and their utility function. This thesis asserts that a double auction process under this assumption tends to approach a general equilibrium price, while the distribution of final allocations may be somewhat dispersed.