ABM Example 1

Continuous Double Auction (CDA)

Heterogeneous traders interacting through a centralized order book with synchronous matching and asynchronous order submission.

AGENT ARCHITECTURE Buyers 10–100 limit_orders budget Sellers 10–100 ask_orders inventory ENV Order Book bid_queue, ask_queue mid_price, spread transaction_log submit_bid submit_ask Order Matching Sort queues by price Find overlap: bid ≥ ask Execute transaction(s) fill_notify Update State position++ budget-- update invent. KEY Agent = white box | Environment = coral box | Mechanism = gray flow

MECHANISMS

Price Discovery

Orders submitted at highest buyers willingly pay and lowest sellers willing to accept converge to a fair price through order matching.

MECHANISMS

Inventory Management

Sellers adjust markup dynamically based on inventory levels and demand signals, creating endogenous price pressure.

STOCHASTICITY

Signal Noise

  • Buyer reservation price ~ N(μ_fundamental, σ=0.05)
  • Creates heterogeneous willingness to pay
  • Drives order diversity and spread

OBSERVABLES

Output Metrics

  • mid_price — bid + ask) / 2
  • spread — ask − bid
  • volume — trades per period
  • volatility — price std dev