Endowment game and optimal total quantity in artificial markets

The paper deals with two key issues related to the creation of artificial markets: determining the total quantity of the market good, and the initial allocation of these goods among the participants. Various market structures are considered, and the “Endowment Game” allows for allocation principles different from efficiency to be examined. I show that the characteristics of these principles vary with the market structure. Total quantity is chosen by a social planner. I show that the optimal total quantity varies with market structure and the allocation principle. The results have implications for the international emission trading system.