What is a Walrasian Market?
In a Walrasian market, buy and sell orders are grouped together and then executed at specific times, rather than executed one by one continuously.
How Does a Walrasian Market Work?
Let's assume that the following buy orders for Company XYZare received:
Buy 1,000 shares @ $4.25
Buy 500 shares @ $4.00
Buy 700 shares @ $4.50
Buy 500 shares @ $4.25
Sell 1,000 shares @ $4.25
Sell 500 shares @ $4.00
Sell 700 shares @ $4.50
Sell 500 shares @ $4.25
In a Walrasian market, the buy orders are grouped together and executed at a price and time that call market.clear most of those orders. In this case, that price might be $4.25. that even though some of the parties were willing to buy or sell for $4.00, the price that clears most of the transactions is $4.25, and that is the price at which the exchange's executes these trades in a
A Walrasian market is different from an auction market, whereby buyers and sellers trade continuously.
Why Does a Walrasian Market Matter?
Walrasian markets are helpful in illiquid markets or markets where there are few buyers, sellers, and to trade. As such, the buyers and sellers in a Walrasian market do not have the final say on what the final price is in their trades. This differs from an , whereby the final price is more directly determined by forces.