Impact of Market Design and Trading Network Structure on Market Efficiency

Nick Arnosti; Bogumił Kamiński; Paweł Prałat; Mateusz Zawisza

doi:10.1007/978-3-031-59205-8_4

Impact of Market Design and Trading Network Structure on Market Efficiency

Nick Arnosti, Bogumił Kamiński, Paweł Prałat, Mateusz Zawisza

Industrial and Systems Engineering

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

Abstract

This paper investigates the influence of market design, market size, and trading network structure on market efficiency and trade participation rate. The study considers two market designs: Zero Intelligence Traders (ZIT) in Chamberlin’s bilateral haggling market and a greedy matching of traders on a network. Sellers and buyers are embedded in a random bipartite graph with varying network densities, and markets vary in size from 20 to 2000 traders. Simulations reveal that greedy matching generally leads to more efficient allocations than ZIT trading networks. By increasing the average degree of a trading network from 1 to 5 or 10, market efficiency can be significantly improved for both market designs, achieving 89% and 95% of maximum efficiency, respectively. The study also contradicts the common belief that larger markets are better, as no significant impact of market size was found. We discuss the policy implications of these results.

Original language	English (US)
Title of host publication	Modelling and Mining Networks - 19th International Workshop, WAW 2024, Proceedings
Editors	Megan Dewar, François Théberge, Daniel Kaszynski, Malgorzata Wrzosek, Bogumil Kaminski, Lukasz Krainski, Pawel Pralat
Publisher	Springer Science and Business Media Deutschland GmbH
Pages	47-64
Number of pages	18
ISBN (Print)	9783031592041
DOIs	https://doi.org/10.1007/978-3-031-59205-8_4
State	Published - 2024
Event	19th International Workshop on Modelling and Mining Networks, WAW 2024 - Warsaw, Poland Duration: Jun 3 2024 → Jun 6 2024

Publication series

Name	Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume	14671 LNCS
ISSN (Print)	0302-9743
ISSN (Electronic)	1611-3349

Conference

Conference	19th International Workshop on Modelling and Mining Networks, WAW 2024
Country/Territory	Poland
City	Warsaw
Period	6/3/24 → 6/6/24

Bibliographical note

Publisher Copyright:
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024.

Keywords

agent-based simulation (ABM)
bilateral exchange
bipartite graph
greedy matching algorithm
Hungarian Algorithm
market efficiency
network science
Zero-Intelligence Traders

Publisher link

10.1007/978-3-031-59205-8_4

Find It

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Cite this

Arnosti, N., Kamiński, B., Prałat, P., & Zawisza, M. (2024). Impact of Market Design and Trading Network Structure on Market Efficiency. In M. Dewar, F. Théberge, D. Kaszynski, M. Wrzosek, B. Kaminski, L. Krainski, & P. Pralat (Eds.), Modelling and Mining Networks - 19th International Workshop, WAW 2024, Proceedings (pp. 47-64). (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 14671 LNCS). Springer Science and Business Media Deutschland GmbH. https://doi.org/10.1007/978-3-031-59205-8_4

Impact of Market Design and Trading Network Structure on Market Efficiency. / Arnosti, Nick; Kamiński, Bogumił; Prałat, Paweł et al.
Modelling and Mining Networks - 19th International Workshop, WAW 2024, Proceedings. ed. / Megan Dewar; François Théberge; Daniel Kaszynski; Malgorzata Wrzosek; Bogumil Kaminski; Lukasz Krainski; Pawel Pralat. Springer Science and Business Media Deutschland GmbH, 2024. p. 47-64 (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 14671 LNCS).

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

Arnosti, N, Kamiński, B, Prałat, P & Zawisza, M 2024, Impact of Market Design and Trading Network Structure on Market Efficiency. in M Dewar, F Théberge, D Kaszynski, M Wrzosek, B Kaminski, L Krainski & P Pralat (eds), Modelling and Mining Networks - 19th International Workshop, WAW 2024, Proceedings. Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics), vol. 14671 LNCS, Springer Science and Business Media Deutschland GmbH, pp. 47-64, 19th International Workshop on Modelling and Mining Networks, WAW 2024, Warsaw, Poland, 6/3/24. https://doi.org/10.1007/978-3-031-59205-8_4

Arnosti N, Kamiński B, Prałat P, Zawisza M. Impact of Market Design and Trading Network Structure on Market Efficiency. In Dewar M, Théberge F, Kaszynski D, Wrzosek M, Kaminski B, Krainski L, Pralat P, editors, Modelling and Mining Networks - 19th International Workshop, WAW 2024, Proceedings. Springer Science and Business Media Deutschland GmbH. 2024. p. 47-64. (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)). doi: 10.1007/978-3-031-59205-8_4

Arnosti, Nick ; Kamiński, Bogumił ; Prałat, Paweł et al. / Impact of Market Design and Trading Network Structure on Market Efficiency. Modelling and Mining Networks - 19th International Workshop, WAW 2024, Proceedings. editor / Megan Dewar ; François Théberge ; Daniel Kaszynski ; Malgorzata Wrzosek ; Bogumil Kaminski ; Lukasz Krainski ; Pawel Pralat. Springer Science and Business Media Deutschland GmbH, 2024. pp. 47-64 (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)).

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