Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
a) which trader get filled and for what volume
b)what will be the market
c) Determine economic surplus for each trader

Transcribed Image Text:One complication in Nodal auctions is that traders can either buy or sell using "outright" orders (Traders 1
and 5) or "spread" orders (Traders 2, 3, and 4). In an outright order, the trader wants to buy or sell a
single product at some price. In a spread order, a trader wants to simultaneously buy AND sell the same
volume of two different products and will only transact if they can get both products. A spread order means
that the trader does not care about the absolute price of either product, only that the price difference
between the products they are buying and those they are selling is less than their spread order price.
The notation of the bid diagram is as follows: an arrow into a product means the trader wants to buy that
product and an arrow out means the trader wants to sell that product. Thus Trader 2 wants to buy Product C
and sell Product A, looking for the difference (i.e. price of C - price of A) to be <= $15/lot.
ORDERS
Trader 1 (outright)
3,000 lots
Trader 5 (outright)
20,000 lots
@ $50/lot
@ $30/lot
Trader 4 (spread)
5,000 lots
@ $35/lot
Product A
Product B
Trader 2 (spread)
Product C
Trader 3 (spread)
5,000 lots
@ $25/lots
2,000 lots
@ $15/lots

Transcribed Image Text:Anglyr's or the diggram
Thador 1 buge Piechuck A
Trado a buyu Piochuck C and
selly ProdudA
Producd
Trador 3 buye Preduct B and vello
Product C
B and del
Trado
bun Piodud B and vel
froduck A
roder 5 sello Product R
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