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Price Flexibility and Market Performance in Experimental Markets

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  • Mestelman, Stuart
  • Welland, Douglas

Abstract

Posted offer and double auction pricing institutions are examples of fixed and flexible pricing institutions, respectively. In laboratory settings, double auction markets dominate posted offer institutions in terms of the amount of potential surplus which traders are able to extract. These results are invariant with respect to the experience of traders or the perishability of the good traded. Performance differences across institutions may be due to information differences. The introduction of a second price-posting in the posted offer institution results in a pricing institution which is closer to the double auction's flexible pricing environment. Laboratory results suggest that under otherwise comparable conditions, this innovation is sufficient to remove the performance differences which have been demonstrated to exist between the posted offer and double auction institutions.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 4 (1994)
Issue (Month): 1 (January)
Pages: 105-29

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Handle: RePEc:spr:joecth:v:4:y:1994:i:1:p:105-29

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Cited by:
  1. Davis, Douglas D. & Williams, Arlington W., 1997. "The effects of nonstationarities on performance in call markets," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 39-54, January.
  2. Mestelman, Stuart & Welland, Douglas, 1995. "Experience and inventory management in double-auction markets," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 35-48, January.
  3. Raluca Parvulescu & Nicolas Vaneecloo, 2012. "Concurrence et expérimentations de marché, un débat clos? Un état des lieux pour un nouveau programme de recherche," Working Papers 2012-ECO-14, IESEG School of Management.
  4. Douglas D. Davis & Charles A. Holt, 1996. "Markets with posted prices: recent results from the laboratory," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 20(3), pages 291-320, September.
  5. Bart Wilson, 1998. "What Collusion? Unilateral Market Power as a Catalyst for Countercyclical Markups," Experimental Economics, Springer, vol. 1(2), pages 133-145, September.

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