Evolution of markets a simulation with centralized, posted offer and decentralized formats Journal of Evolutionary Economics, Forthcoming, 2016

Abstract

We apply standard evolutionary dynamics to study trader participation in three competing market formats call market (CM), posted offer (PO) and decentralized market (DM). In our framework, heterogeneous buyers and sellers seek to transact a homogeneous good, which can be done by allocating their time among three different market formats. Our results show that (i) the final participation of traders in the CMis much higher, (ii) the PO can coexist with the CM, (iii) the DM unravels when competing against CM and (iv) the DM can coexist with the PO, depending on the initial participation conditions. Thus, we demonstrate that agent-based simulations are sufficient to achieve some of the previously known theoretical results, while examining abroad menu of formats, including those used most frequently in 21st century markets

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In Journal of Evolutionary Economics
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