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Concurrent trading in two experimental markets with demand interdependence

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Author Info

  • Arlington W. Williams

    ()
    (Department of Economics, Wylie Hall 105, Indiana University, Bloomington, IN 47405, USA)

  • John O. Ledyard

    ()
    (Division of Humanities and Social Sciences, 228 - 77, California Institute of Technology,Pasadena, CA 91125, USA)

  • Steven Gjerstad

    ()
    (T.J. Watson Research Center, IBM Corporation, Route 134, Kitchawan Road,Yorktown Heights, NY 10598, USA)

  • Vernon L. Smith

    ()
    (Economics Science Laboratory, McClelland Hall 116, University of Arizona,Tuscon, AZ 85721, USA)

Abstract

We report results from fifteen computerized double auctions with concurrent trading of two commodities. In contrast to prior experimental markets, buyers' demands are induced via CES earnings functions defined over the two traded goods, with a fiat money expenditure constraint. Sellers receive independent marginal cost arrays for each commodity. Parameters for buyers' earnings functions and sellers' costs are set to yield a stable, competitive equilibrium. In spite of the complexity introduced by the demand interdependence, the competitive model is a good predictor of market outcomes, although prices tend to be above (below) the competitive prediction in the low-price (high-price) market.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 16 (2000)
Issue (Month): 3 ()
Pages: 511-528

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Handle: RePEc:spr:joecth:v:16:y:2000:i:3:p:511-528

Note: Received: April 30, 1999; revised version: June 7, 1999
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Related research

Keywords: Induced utility; General equilibrium; Double auction.;

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Cited by:
  1. Sean Crockett & Stephen Spear & Shyam Sunder, 1899. "Learning Competitive Equilibrium," GSIA Working Papers 2003-E18, Carnegie Mellon University, Tepper School of Business.
  2. Aurora García-Gallego & Nikolaos Georgantzís & Roberto Hernán-González & Praveen Kujal, 2012. "How do Markets Manage Water Resources? An Experiment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 53(1), pages 1-23, September.
  3. Deck, Cary A., 2004. "Avoiding hyperinflation: Evidence from a laboratory economy," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 147-170, March.
  4. Deck, Cary A. & McCabe, Kevin A. & Porter, David P., 2006. "Why stable fiat money hyperinflates: Results from an experimental economy," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 471-486, November.
  5. Smith, Vernon L., 2002. "Constructivist and Ecological Rationality in Economics," Nobel Prize in Economics documents 2002-7, Nobel Prize Committee.
  6. Noussair, Charles & Plott, Charles & Riezman, Raymond, 2003. "Production, trade, prices, exchange rates and equilibration in large experimental economies," Working Papers 1188, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. Smith, Vernon L., 2010. "Theory and experiment: What are the questions?," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 3-15, January.

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