PT  - JOURNAL ARTICLE
AU  - Philippe Gregoire
AU  - James Eaves
AU  - Michel Gendron
AU  - Manel Kammoun
TI  - The Effect of Brokers on the Dynamics of a Walrasian Auction
AID  - 10.3905/jot.2013.8.4.054
DP  - 2013 Sep 30
TA  - The Journal of Trading
PG  - 54--64
VI  - 8
IP  - 4
4099  - https://pm-research.com/content/8/4/54.short
4100  - https://pm-research.com/content/8/4/54.full
AB  - We study the effect of the presence of brokers in an experimental exchange market using the Walrasian tâtonnement mechanism. We find that brokers tend to act as liquidity providers, submitting orders likely to equilibrate supply and demand given the orders they receive from other participants. As a result, average excess demand and prices are less volatile, and markets reach equilibrium more often, when brokers are present compared with the case without brokers. Brokers’ liquidity-providing behavior is more pronounced when their compensation includes, in addition to their trading profit, a component related to trading volume when equilibrium is reached. Under-revelation, a strategic behavior inherent to Walrasian auctions, is about the same with and without brokers when markets clear, yielding similar levels of market efficiency, measured as total surplus divided by potential surplus.TOPICS: Exchanges/markets/clearinghouses, volatility measures