Keep It Down: An Experimental Test of the Truncated k-Double Auction
AbstractThe introduction of a centralized institution for trading production rights in quota-regulated agricultural sectors can dramatically improve the flow of information among market participants and increase efficiency. On the other hand, prevailing conditions in these small markets can provide sellers with a market advantage, yielding high quota prices that impose important financial costs on quota holders and limit the entry of new producers into the industry. In this paper, we modify the normal allocation rule of the k-double auction (kDA) to counter thin market conditions and to favor buyers who bid low prices. In laboratory experiments, we test the â€œtruncatedâ€ kDA (T-kDA) against a regular kDA for its ability to affect buyer and seller behavior and decrease equilibrium prices, and assess how it impacts efficiency. The results show that the T-kDA significantly lowers the equilibrium price and results in moderate efficiency losses. Most importantly, the T-kDA effectively counters the market power of oligopolists when demand far outstrips supply.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.
Volume (Year): 39 (2010)
Issue (Month): 2 (April)
k-double auction; experimental economics; truncated; efficiency; commodity market; Agribusiness; Industrial Organization; Institutional and Behavioral Economics;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Van Boening, Mark V. & Williams, Arlington W. & LaMaster, Shawn, 1993. "Price bubbles and crashes in experimental call markets," Economics Letters, Elsevier, vol. 41(2), pages 179-185.
- Rajsic, Predrag & Fox, Glenn, 2012.
"Quota Prices as Indicators of Comparative Advantage in Supply Managed Industries,"
142370, Canadian Agricultural Trade Policy Research Network.
- Rajsic, Predrag & Fox, Glenn, 2012. "Quota Prices as Indicators of Comparative Advantage in Supply Managed Industries," Trade Policy Briefs 145972, Canadian Agricultural Trade Policy Research Network.
- Kent D. Messer & James J. Murphy, 2010.
"Foreword: Special Issue on Experimental Methods in Environmental, Natural Resource and Agricultural Economics,"
2010-03, University of Alaska Anchorage, Department of Economics.
- Messer, Kent D. & Murphy, James J., 2010. "FOREWORD: Special Issue on Experimental Methods in Environmental, Natural Resource, and Agricultural Economics," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 39(2), April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.