Social Networking and Information Diffusion in Automated Markets

To what extent do networks of influence between market traders impact upon their individual performance and the performance of the specialists in which they operate? Such a question underpins the content of this study, as an investigation is conducted using the JCAT double auction market simulation platform, developed as a part of the CAT Market Design Tournament. Modifications to the JCAT platform allow for influential networks to be established between traders, across which they transmit information about their trading experiences to their connected peers. Receiving traders then use this information (which is the product of an n-armed bandit selection algorithm) to guide their own selection of market specialist and trading strategy. These modifications give rise to a sequence of experimental tests, the documented results of which provide an answer to the question phrased above. Analysis of the results shows the benefits of taking advice as a collective and demonstrates the properties of the communities which emerge as a result of engaging in widespread social contact.