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View all- Corgnet BDeck CDeSantis MHampton KKimbrough E(2023)When Do Security Markets Aggregate Dispersed Information?Management Science10.1287/mnsc.2022.446369:6(3697-3729)Online publication date: 1-Jun-2023
Equilibrium Discovery and Preopening Mechanisms in an Experimental Market
Pages 753 - 769
Abstract
We experimentally analyze how to design preopening mechanisms facilitating coordination on high equilibrium liquidity and gains from trade. We allow a call auction to be preceded by a preopening or not, preopening orders to be binding or not, and the opening time to be deterministic or random. When the preopening is nonbinding, traders place manipulative orders, reducing the credibility of preplay communication. Random market opening deters manipulation, but also hinders communication by making it costly. Gains from trade are maximized when preopening orders are binding. This enables some traders to place early limit orders, attracting further liquidity.
Data, as supplemental material, are available at <ext-link ext-link-type="uri" xlink="http://dx.doi.org/10.1287/mnsc.2013.1787">http://dx.doi.org/10.1287/mnsc.2013.1787</ext-link>.
This paper was accepted by Wei Xiong, finance.
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- Equilibrium Discovery and Preopening Mechanisms in an Experimental Market
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Linthicum, MD, United States
Publication History
Published: 01 March 2014
Accepted: 22 May 2013
Received: 10 October 2011
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View all- Corgnet BDeck CDeSantis MHampton KKimbrough E(2023)When Do Security Markets Aggregate Dispersed Information?Management Science10.1287/mnsc.2022.446369:6(3697-3729)Online publication date: 1-Jun-2023