DEMAND REVELATION AND TATONNEMENT AUCTIONS

The tatonnement process is inherently a price taking process. An aucti oneer calls out a price and traders respond with a quantity signal. Th is tatonnement (groping) process contrasts with a double auction (cont inuous bid-ask) process that utilizes price signals. Do traders in thi s institution fully reveal quantity or do they underreveal affecting p rice, quantity, and efficiency? In the experiments reported here, trad ers playing against a fully revealing automaton systematically attempt to manipulate price by underrevealing quantity bid or offered. (C) 19 98 Elsevier Science B.V. All rights reserved.