We examine the rate of convergence to efficiency in the buyer's bid double auction for sequences of markets in which the number m of buyers can be arbitrarily larger than the number n of sellers. This rate is shown to be O(n/m2) when m, n are such that m≥βn for a constant β>1. This is consistent with the O(1/m) rate that holds when 1/β≤n/m≤β, which is proven by A. Rustichini et al. (1994, Econometrica62, 1041-1063). Consequently, the single formula O(n/m2) developed in this paper expresses the rate of convergence to efficiency for all sequences of m and n for which n/m is bounded above. Journal of Economic Literature Classification Numbers: D44, C78, G14.
- Double auction; bargaining; market microstructure
ASJC Scopus subject areas
- Economics and Econometrics