2 Dynamic double auction is natural to ask whether the price process generated by this DA mechanism converges to an equilibrium of the underlying economy or not. Both A. Smith(1776) and Hayek(1945) raise a similar question how a mar­ket mechanism in a laissez-faire economy, where individual participants with little information about total demand and supply act solely in their self-interests, is able to integrate“dispersed bits of[incomplete] information” correctly into prices. A. Smith(1776) uses his famous“invisible hand” metaphor to describe its magnificence of a price mechanism. Hayek(1945, p. 519) has further explored the idea: “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate“given” resources [ · · ·] , it is rather a problem of the utilization of knowledge not given to anyone in its totality.” He goes on by saying:“This mechanism would have been acclaimed as one of the greatest triumphs of the human mind” if“It were the result of deliberate human design”(Hayek, 1945, p. 527). It should be noted that DA mechanisms employed in real exchange markets across the world are deliberately designed by humans. An answer to the question is important for understanding price determina­tion in an exchange market, since DA mechanisms have been widely used in equity, commodity and currency markets, among others. For example, an ans­wer to the question is vital for understanding the efficient markets hypothesis (Fama, 1965) and the excess volatility puzzle(Shiller, 1981). Nonetheless, it is not easy to come up with an answer. Indeed, does a DA mechanism matter for the price determination of an asset? According to the efficient markets hypothesis, the answer should be no since the price of an asset in an exchange market should always follow its fundamental, with no systematic disparity between the two that can be detected with fundamental or technical analysis. On the other hand, excess volatility suggests that the answer may be yes, since the price of an equity can deviate from its fundamental to a great degree and such a deviation has been realized by a DA mechanism through a sequence of Journal of Mechanism and Institution Design (), 2016