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The Hayek Hypothesis in Experimental Auctions: Institutional Effects and Market Power

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  • Davis, Douglas D
  • Williams, Arlington W

Abstract

The authors report twelve market experiments utilizing a "seller market power" supply and demand structure where two of five sellers can unilaterally increase their profit by withholding supply. The data indicate that both the double auction and posted offer institutions result in traders extracting the bulk of the potential gains from exchange in the market; however, prices generally occur about the competitive equilibrium prediction. Market power, in the form of strategic supply withholding, does not appear to be responsible for the supracompetitive prices. Copyright 1991 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 29 (1991)
Issue (Month): 2 (April)
Pages: 261-74

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Handle: RePEc:oup:ecinqu:v:29:y:1991:i:2:p:261-74

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Cited by:
  1. Omar Al-Ubaydli & Peter Boettke, 2012. "Markets as economizers of information: Field experimental examination of the 'hayek hypothesis'," Framed Field Experiments 00195, The Field Experiments Website.
  2. repec:fee:wpaper:1201 is not listed on IDEAS
  3. repec:wyi:wpaper:002051 is not listed on IDEAS
  4. Cason, Timothy N. & Datta, Shakun, 2006. "An experimental study of price dispersion in an optimal search model with advertising," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 639-665, May.
  5. Lisa Posey & Abdullah Yavas, 2007. "Screening equilibria in experimental markets," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 32(2), pages 147-167, December.
  6. Elliott, Steven R. & Godby, Robert & Kruse, Jamie Brown, 2003. "An experimental examination of vertical control and cost predation," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 253-281, February.
  7. Jay Corrigan, 2005. "Is the Experimental Auction a Dynamic Market?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 35-45, 05.
  8. Timothy N. Cason & Shakun Datta, 2008. "Costly Buyer Search in Laboratory Markets with Seller Advertising," Purdue University Economics Working Papers 1212, Purdue University, Department of Economics.
  9. Jim Engle-Warnick & Bradley Ruffle, 2006. "Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets," Departmental Working Papers 2006-12, McGill University, Department of Economics.
  10. Sherstyuk, Katerina, 2008. "Some Results on Anti-Competitive Behavior in Multi-Unit Ascending Price Auctions," Handbook of Experimental Economics Results, Elsevier.
  11. Shachat, Jason & Zhang, Zhenxuan, 2012. "The Hayek hypothesis and long run competitive equilibrium: an experimental investigation," MPRA Paper 39579, University Library of Munich, Germany.

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