PT  - JOURNAL ARTICLE
AU  - Michael P. Wellman
AU  - Elaine Wah
TI  - Strategic Agent-Based Modeling of Financial Markets
AID  - 10.7758/RSF.2017.3.1.06
DP  - 2017 Jan 01
TA  - RSF: The Russell Sage Foundation Journal of the Social Sciences
PG  - 104--119
VI  - 3
IP  - 1
4099  - http://www.rsfjournal.org/content/3/1/104.short
4100  - http://www.rsfjournal.org/content/3/1/104.full
AB  - Understanding the implications of algorithmic trading calls for modeling financial markets at a level of fidelity that often precludes analytic solution. We describe how agent-based simulation modeling can be combined with game-theoretic reasoning to examine the effects of market variables on outcomes of interest. The approach is illustrated in a basic model where investors trade a single security through a continuous double auction mechanism. Our results demonstrate the feasibility of the approach, and raise questions about the use of spreads as a proxy for trading cost and welfare.