The Effect of Boundary Conditions on Efficiency and Pricing in Double‐auction Markets With Zero‐intelligence Agents

Abstract

SUMMARY The computational tractability of many markets with computerized agents requires they be subject to boundary conditions that are both unnecessary and undesirable in markets with humans. In particular, double‐auction markets with zero‐intelligence agents, which are a standard baseline in computational economics, constrain all bids, offers and trade prices to lie between an upper and a lower bound. This paper shows how changes in these boundary conditions influence pricing and efficiency. It is found that boundary conditions consistent with competitive pricing are generally inconsistent with the most efficient operation of those markets. Copyright © 2012 John Wiley & Sons, Ltd.

Outsourcing and Market Value of the Firm: Toward a Comprehensive Model

“…The former are often customized to the needs of the buyer or focal firm, while the latter are more generic, involving standardized business process solutions that are used to drive down cost. Finally, the paper adds to the literature in AIS that has applied novel quantitative methods to financial research (Biscontri, 2012;Miller, 2012).The remainder of the paper is organized as follows. In Section 2 we review the literature on outsourcing and event studies.…”