Robustness of the k-double auction under Knightian uncertainty

Shafer, Rachel C

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https://hdl.handle.net/2142/90542 Copy

Description

Title

Robustness of the k-double auction under Knightian uncertainty

Author(s)

Shafer, Rachel C

Issue Date

2016-04-20

Director of Research (if dissertation) or Advisor (if thesis)

Williams, Steven R.

Doctoral Committee Chair(s)

Williams, Steven R.

Committee Member(s)

• Cho, In-Koo
• Deltas, George
• Perry, Martin

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Double Auctions
• Regret Minimization
• Knightian Uncertainty
• Decision Theory
• Mechanism Design

Abstract

This dissertation considers the robustness of private value and common value k-double auctions when those markets are populated by regret minimizers. Regret minimizing agents, unlike typical expected utility maximizers, need not commit to a single prior in their decision rule. In fact, it is a feature of the minimax regret decision rule that is not based on any prior. This makes the decision rule an interesting one for agents who face Knightian Uncertainty. A decision problem involves Knightian uncertainty if the agents know the possible outcomes but not those outcomes' probabilities -- as may be the case in a new market. This dissertation shows that in a private value k-double auction, minimax regret traders will not converge to price-taking behavior as the market grows. Similarly, in a common value auction, traders' behavior may depend on the parameter k, but does not depend on the number of other traders in the market. The invariance of regret minimizing traders' strategies to the size of the markets they inhabit is not an accident of the sealed bid double auction institution. In fact, it is a consequence of the symmetry axiom. The final chapter in this dissertation shows that any agents in a k-double auction who use decision rules that accord with the symmetry axiom, then their bids and asks will not depend on the number of rival traders.

Graduation Semester

2016-05

Type of Resource

text

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http://hdl.handle.net/2142/90542

Copyright and License Information

Copyright 2016 Rachel Shafer

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