INSTITUTE OF MATHEMATICAL ECONOMICS

Wulf Albers, Andreas Uphaus, Bodo Vogt

Working-Paper No. 287

January 1998

Abstract

Theoretical models of bidding in double auctions or markets permit arbitrary real numbers as bids and asks. However, in reality the exactness is restricted. Two phenomena can be observed. 1. Agents analyse markets with a given level of graneness of judgement. 2. The multilateral bidding process happening in the auction refines the structure obtained by the graneness of judgement to a finer, but again limited level of graneness. The paper analyses the structure of bids and asks of the most frequently traded German stock (Volkswagen) for the complete order book of the German electronic stock exchange market (IBIS) during a period of three months. It gives a first detailed analysis of the structure of offers induced by the prominence structure of numerical perception.
The main result is that the concession behavior is determined by the prominence structure of the present best offer on the concession maker's side, and on the extension of the spread. Specificly, it is identical when the spread is shifted in multiples of .50, and it is identical for bid- and ask-concessions when the corresponding steps of multiples of .50 have the same distance from the respective best offer on the concession maker's side.