ICES Experimental Economics Brown Bag Lecture
Market welfare, connected and disconnected market: An experimental Design
Thursday, April 6, 2023 12:00 PM to 1:00 PM EDT
Vernon Smith Hall (formerly Metropolitan Building), Room 5075
The Interdisciplinary Center for Economic Science (ICES) presents an ICES Brown Bag Lecture featuring:
George Mason University
Market welfare, connected and disconnected market: An experimental Design
Abstract
Theories predict that shifting jointly clearing connected market to independently clearing disconnected market would improve the total welfare, by allocating more suitable assets to traders, caused by increasing aggressiveness and trading volume. We conduct laboratory experiment designs to test the predictions, under symmetric market settings with symmetric trading needs for substitute risky assets. We conjecture to find the disconnected market has a significantly lower trading inefficiency compared to the connected market with contingent demand schedules. We also conjecture to find the inefficiency reduction effect due to disconnecting the market is more significant when the market has a smaller number of traders, in other words, the market is less competitive. Our results provide insights into the non-redundancy of innovations of trading mechanisms, especially fragmentation of markets.
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