Robustness of the k-double auction under Knightian uncertainty

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.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2016

Author dc:creator

• Shafer, Rachel C

Contributors dc:contributor

• Williams, Steven R.
• Cho, In-Koo
• Deltas, George
• Perry, Martin

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

Statement dc:rights

• Copyright 2016 Rachel Shafer

Language dc:language

en

Handle dc:identifier

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

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/90542