Markups in double auction markets

We study the continuous double auction (CDA) market with simulated traders using three simple markup rules. Relative to analytic results obtained for markups in the simpler call market (CM), we find that uniform CDA markups have a more complex and non-monotonic impact on CDA market outcomes such as price, volume, and efficiency. The symmetric Nash equilibrium markup in the CDA is remarkably close to the most efficient markup in thick markets, which may partially explain the “mysterious” efficiency for CDA market.