Controlling Individual Types

A big advantage of using password files is that you lock each trader’s number in the market. For

example on the default password file the first five passwords are as follows:

aa3247

ADD6790

adn3275

aj9134

AT5678

So the trader who logs in with aa3247 is trader number 1, ADD6790 is trader number 2 and so on. It does not matter when they login their slot is preserved. This in turn lets you control precisely each trader’s type.

For example in the basic case B01 there are two types defined as follows:

Trader Type Data	Type 1	Type 2
Cash	1000	1000
Endow 1	15	0
Endow 2	0	15
Rights 1	0	0
Rights 2	0	0
Lower Bound	-100000000	-100000000
Lower Bound Payoff	-100000000	-100000000
Upper Bound	100000000	100000000
Upper Bound Payoff	100000000	100000000
Constant	0	0
Linear Coefficient	0.0001	0.0001
Quadratic Coefficient	0	0
Log Coefficient	0	0
CARA Coefficient	0	0
CARA Exponent	0	0
HARA Coefficient	0	0
HARA Exponent	0	0

Each trader type has 1000 cash and trader type 1 has 15 units of endow 1 (coupon bond) and 0 units of the zero coupon bond. Trader type 2 has 0 units of the coupon bond and 15 units of the zero coupon bond. Their trading rights are 0 for each (no restrictions).

Aside: Trading rights can be set per security and per trader: 0 no restrictions, 1 make market only (i.e., a dealer), 2 take market only, 3 cannot trade at all.

A linear conversion is used for both types to trading or grade cash bonus. This is merely 0.0001*market cash of their final marked position. Some interesting and simple variations of this is to use a natural logarithm coefficient (say 1000 beside the log coefficient) this will scale market cash as 1000*ln(Market Cash) and setting it to 0 if market cash is negative. The advantage of this is that it makes the traders attend to risk and return as if they are risk averse with log preferences.

In the above the upper and lower bounds define what range of market cash is permitted. This can be large. Outside the range the trading bonus (Grade cash) conversion is bounded at the amount that corresponds to the upper/lower bound.

Locking Types:

In the above the first five passwords lock in the types as follows:

Aa3247 = Type 1,

ADD6790 = Type 2,

Adn3275 = Type 1,

Aj9134 = Type 2, etc.,

This is assigned irrespective of when they actually login or what order they login.

So you can see how to control the types and or type of market (dealer versus double auction) by specifying each type carefully.

How Do I Add Types?

You can easily add new types to any case. To do so requires using additional columns carefully in the spreadsheet as illustrated below:

First, Cell B6 specifies how many types. The default for B01 is 2

Second, A,B,C 20 --- A,B,C 47 must exactly equal the two types plus the labels.

This is illustrated below:

Number of Securities	2	Name	Cp Bnd
Maximum Number of Trials	8	Security Type	Bond
Number of Periods per Trial	3	Price Quotes	Endogenous
Period Length (seconds)	240	Start Life	1
Maximum Number of Traders	60	End Life	3
Number of Trader Types	2	Short selling	Yes
Market Depth	10	Quote to Price Formula	Quote
Depth Displayed	5	Information	No
Borrowing Allowed	Yes
Last Row with Exogenous Prices
Number of Information Types	0
Last Row with Information
Recalculate	No
Trader Type Data	Type 1	Type 2	Payoff and Settlement Data
Cash	1000	1000	Trial 1
Endow 1	15	0	Period 2
Endow 2	0	15	Period 3
Rights 1	0	0	Trial 2
Rights 2	0	0	Period 2
Lower Bound	-100000000	-100000000	Period 3
Lower Bound Payoff	-100000000	-100000000	Trial 3
Upper Bound	100000000	100000000	Period 2
Upper Bound Payoff	100000000	100000000	Period 3
Constant	0	0	Trial 4
Linear Coefficient	0.0001	0.0001	Period 2
Quadratic Coefficient	0	0	Period 3
Log Coefficient	0	0	Trial 5
CARA Coefficient	0	0	Period 2
CARA Exponent	0	0	Period 3
HARA Coefficient	0	0	Trial 6
HARA Exponent	0	0	Period 2

Now suppose you want to change from 2 types to 4 types, you do so as follows:

First cut the tan section that is beside the types above and move this subsection over three columns. Then copy and paste the types section (two traders only not names) and paste beside type 2. Relabel types to 3 and 4 and change as desired the components.

Finally, do not forget to change cell B6 from 2 to 4. This will now appear as follws (plus we have given 3 and 4 a real position 1,000,000 cash and 15,000 securities!

Number of Securities	2	Name	Cp Bnd	Zero Cp
Maximum Number of Trials	8	Security Type	Bond	Bond
Number of Periods per Trial	3	Price Quotes	Endogenous	Endogenous
Period Length (seconds)	240	Start Life	1	1
Maximum Number of Traders	60	End Life	3	3
Number of Trader Types	4	Short selling	Yes	Yes
Market Depth	10	Quote to Price Formula	Quote	Quote
Depth Displayed	5	Information	No	No
Borrowing Allowed	Yes
Last Row with Exogenous Prices
Number of Information Types	0
Last Row with Information
Recalculate	No
Trader Type Data	Type 1	Type 2	Type 3	Type 4	Payoff and Settlement Data
Cash	1000	1000	1000000	1000000	Trial 1
Endow 1	15	0	15000	0	Period 2
Endow 2	0	15	0	15000	Period 3
Rights 1	0	0	0	0	Trial 2
Rights 2	0	0	0	0	Period 2
Lower Bound	-100000000	-100000000	-100000000	-100000000	Period 3
Lower Bound Payoff	-100000000	-100000000	-100000000	-100000000	Trial 3
Upper Bound	100000000	100000000	100000000	100000000	Period 2
Upper Bound Payoff	100000000	100000000	100000000	100000000	Period 3
Constant	0	0	0	0	Trial 4
Linear Coefficient	0.0001	0.0001	0.0001	0.0001	Period 2
Quadratic Coefficient	0	0	0	0	Period 3
Log Coefficient	0	0	0	0	Trial 5
CARA Coefficient	0	0	0	0	Period 2
CARA Exponent	0	0	0	0	Period 3
HARA Coefficient	0	0	0	0	Trial 6
HARA Exponent	0	0	0	0	Period 2

Finally, whenever you change a case save the Excel spreadsheet and run a local test on the same PC (i.e., open the market and two traders just to try it out).