Competitive Market Behavior: Convergence and Asymmetry in the Experimental Double Auction

We conducted a large number of controlled continuous double auction experiments to reproduce and stress-test the phenomenon of convergence to competitive equilibrium under private information. A common finding across a total of 104 markets (involving over 1,700 subjects) is convergence after a handful of trading periods. Initially, however, there is evidence for an inherent asymmetry that favors buyers, which is expressed in symmetric markets by deal prices that are significantly below equilibrium prices. Analysis of over 80,000 observations of individual bids and asks helps identify several empirical ingredients contributing to the observed phenomena including higher initial aggressiveness amongst buyers than sellers