Evolutionary Sequential Trading

This paper analyzes an Easley and O'Hara (1992) type sequential trading model in an evolutionary setting. We assume that the memory of a market maker is limited, and that traders endogenously choose whether to acquire private information with a fixed cost. We show that the ratio of the informed traders is proportional to the width of the bid ask spread, and that the price converges to the strong-form efficient level exponentially.

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Year of publication:	2010-01-13
Authors:	Ishii, Ryosuke
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 30.2010, 1, p. 192-203
Publisher:	AccessEcon
Subject:	Market microstructure \| Information asymmetry \| Bayesian learning \| Bid-ask spread \| Evolutionary game theory

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	D4 - Market Structure and Pricing
Source:	RePEc - Research Papers in Economics

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