Market Microstructure

Market microstructure is the study of how financial markets operate on a small scale, focusing on the processes and mechanisms through which securities are traded. In experimental finance, researchers simulate trading environments to observe how factors like order types, pricing, and market rules influence traders' behaviors and market outcomes. This helps us understand how information affects prices, the role of liquidity, and how different trading strategies can lead to varying results. Ultimately, it enhances our knowledge of market dynamics and informs policy decisions for more efficient and fair trading systems.