Off-Floor Trading, Disintegration, and the Bid-Ask Spread in Experimental Markets

Costly Information Acquisition, Social Networks, and Asset Prices: Experimental Evidence

“…Table V also presents OLS regression results using liquidity measures. The following two measures of market liquidity are used: the market spread each period, defined as the average bid-ask spread evaluated at each transaction in a period, 26 and market depth, defined as the average of the ask depth times ask 26 In calculating the bid-ask spread, in the event that a bid is accepted to form a contract but no ask is entered, we follow Campbell et al (1991) and define the "standing offer" as 9.99, the maximum possible price that the system will accept; if there is an offer price being accepted but no bid, we define the "standing bid" as 0.01, the minimum possible price that is accepted by the system. This definition requires only the weak assumption that any seller would be willing to sell at 9.99 and any buyer would be willing to buy for 0.01.…”

“…In calculating the bid‐ask spread, in the event that a bid is accepted to form a contract but no ask is entered, we follow Campbell et al. () and define the “standing offer” as 9.99, the maximum possible price that the system will accept; if there is an offer price being accepted but no bid, we define the “standing bid” as 0.01, the minimum possible price that is accepted by the system. This definition requires only the weak assumption that any seller would be willing to sell at 9.99 and any buyer would be willing to buy for 0.01.…”

When It's Not The Only Game in Town: The Effect of Bilateral Search on the Quality of a Dealer Market

“…With asymmetrically informed agents, Wolinsky (1990) examines the informational efficiency of transaction prices in a bilateral search market. Campbell, LaMaster, Smith, and Van Boening (1991) conduct a laboratory experiment where agents choose between trading on an organized exchange or bilateral search. Their experiment has symmetrically informed agents, and as such indicates the effect that the cost of search has on the level of search activity.…”

Do stylised facts of order book markets need strategic behaviour?

“…Experimental work has made contributions in this area. Campbell et al (1991) have shed light on factors effecting the variability in the bid-ask spread and Smith et al (1988) have provided possible explanations for the occurrences of bubbles and crashes in financial markets.…”