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The Walrasian Tâtonnement Mechanism and Information

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  • Patrick Joyce

Abstract

This article reports the results of experiments analyzing the Walrasian tâtonnement mechanism. The tâtonnement mechanism has the following characteristics: there is only one price at any time; there is an information mechanism notifying all traders of the price; there is a mechanism for determining quantities offered for sale and purchase at the price; and transactions at nonequilibrating prices are forbidden. In addition, the Walrasian pricing rule is utilized by the auctioneer: the change in price has the same sign as excess demand. The treatment variable used in the experimental design is the degree of segregation of buyers and sellers. Complete segregation means sellers cannot discover the number of buyers and buyers cannot discover the number of sellers at an announced price. The results show that the auction mechanism is stable: it exhibits strong convergence properties and efficiency levels averaging better than 97%. Segregation of the buyers from the sellers leads to a significant difference in underrevelation of demand relative to supply.

Suggested Citation

  • Patrick Joyce, 1984. "The Walrasian Tâtonnement Mechanism and Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 416-425, Autumn.
    • Handle: RePEc:rje:randje:v:15:y:1984:i:autumn:p:416-425
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    Cited by:

    1. Agnieszka Lipieta, 2018. "Adjustment processes resulting in equilibrium in the private ownership economy," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 10(4), pages 305-332, December.
    2. Yan, Huibin & Friedman, Daniel & Munro, David, 2016. "An experiment on a core controversy," Games and Economic Behavior, Elsevier, vol. 96(C), pages 132-144.
    3. Joyce, Patrick, 1998. "Demand revelation and tatonnement auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 163-175, August.
    4. Eaves, James & Williams, Jeffrey & Power, Gabriel J., 2016. "Do traders strategically time their pledges during real-world Walrasian auctions?," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 109-118.
    5. Devansh Jalota & Yinyu Ye, 2022. "Stochastic Online Fisher Markets: Static Pricing Limits and Adaptive Enhancements," Papers 2205.00825, arXiv.org, revised Jan 2023.
    6. Goldberg, Linda & Tenorio, Rafael, 1997. "Strategic trading in a two-sided foreign exchange auction1," Journal of International Economics, Elsevier, vol. 42(3-4), pages 299-326, May.

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