Welfare and Optimal Trading Frequency in Dynamic Double Auctions

Earlier versions of this paper were circulated under the titles "Ex Post Equilibria in Double Auctions of Divisible Assets" and "Dynamic Ex Post Equilibrium, Welfare, and Optimal Trading Frequency in Double Auctions". For helpful comments, we are grateful to Alexis Bergès, Bruno Biais, Alessandro Bonatti, Bradyn Breon-Drish, Jeremy Bulow, Giovanni Cespa, Hui Chen, Peter DeMarzo, David Dicks, Darrell Duffie, Thierry Foucault, Willie Fuchs, Lawrence Glosten, Robin Greenwood, Lawrence Harris, Joel Hasbrouck, Terry Hendershott, Eiichiro Kazumori, Ilan Kremer, Pete Kyle, Martin Lettau, Stefano Lovo, Andrey Malenko, Katya Malinova, Gustavo Manso, Konstantin Milbradt, Sophie Moinas, Michael Ostrovsky, Jun Pan, Andreas Park, Jonathan Parker, Parag Pathak, Michael Peters, Paul Peiderer, Uday Rajan, Marzena Rostek, Ioanid Rosu, Gideon Saar, Xianwen Shi, Andy Skrzypacz, Chester Spatt, Juuso Toikka, Dimitri Vayanos, Xavier Vives, Jiang Wang, Yajun Wang, Bob Wilson, Liyan Yang, Amir Yaron, and Hayong Yun, as well as seminar participants at Stanford University, Simon Fraser University, MIT, Copenhagen Business School, University of British Columbia, UNC Junior Finance Faculty Roundtable, Midwest Theory Meeting, Finance Theory Group Berkeley Meeting, Canadian Economic Theory Conference, HEC Paris, Barcelona Information Workshop, CICF, Stony Brook Game Theory Festival, SAET, Bank of Canada, Carnegie Mellon Tepper, University of Toronto, NBER Microstructure meeting, IESE Business School, Stanford Institute for Theoretical Economics, UBC Summer Workshop in Economic Theory, Toulouse Conference on Trading in Electronic Market, University of Cincinnati, the 10th Central Bank Workshop on the Microstructure of Financial Markets, FIRN Asset Pricing meeting, Imperial College High Frequency Trading Conference, UPenn Workshop on Multiunit Allocation, WFA, Econometric Society World Congress, and the National University of Singapore. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• October 14, 2014