Evolutionary Advantage of Foresight in Markets

We analyze the competitive advantage of price signal infor-mation for traders in simulated double auctions. Previous work has established that more information about the price development does not guarantee higher performance. In par-ticular, traders with limited information perform below mar-ket average and are outperformed by random traders; only insiders beat the market. However, this result has only been shown in markets with a few traders and a uniform distri-bution over information levels. We present additional sim-ulations of several more realistic information distributions, extending previous findings. In addition, we analyze the market dynamics with an evolutionary model of competing information levels. Results show that the highest informa-tion level will dominate if information comes for free. If information is costly, less-informed traders may prevail re-flecting a more realistic distribution over information levels