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Price rigidities and institutional variations in markets with posted prices (*)

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  • Douglas D. Davis

    (Department of Economics, Virginia Commonwealth University, Richmond, VA 23284-4000, USA)

  • Charles A. Holt

    (Department of Economics, University of Virginia, Charlottesville, VA 22901, USA)

Abstract

Standard laboratory posted-offer markets respond slowly and incompletely to demand shocks. In these one-sided markets, where sellers control the setting of prices, very little information is transmitted via the process of exchange. For this reason, traders have trouble distinguishing randomness in their own experience from changes in market fundamentals. This paper reports the results of twelve laboratory markets conducted to assess whether some common variants to standard posted-offer rules can correct the adjustment deficiences. Although discounting, multiple postings and excess demand information all improve performance, we find that response remains poor, and efficiencies low.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 9 (1996)
Issue (Month): 1 ()
Pages: 63-80

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Handle: RePEc:spr:joecth:v:9:y:1996:i:1:p:63-80

Note: Received: December 5, 1994; revised version August 8, 1995
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Cited by:
  1. Bart Wilson, 1998. "What Collusion? Unilateral Market Power as a Catalyst for Countercyclical Markups," Experimental Economics, Springer, vol. 1(2), pages 133-145, September.
  2. Douglas D. Davis & Oleg Korenok, 2005. "Posted - Offer Markets In Near Continuous Time: an Experimental Investigation," Working Papers 0504, VCU School of Business, Department of Economics, revised 2007.
  3. Albert Ballinger & Gerald P. Dwyer, Jr. & Ann B. Gillette, 2004. "Trading institutions and price discovery: the cash and futures markets for crude oil," Working Paper 2004-28, Federal Reserve Bank of Atlanta.
  4. Douglas D. Davis & Charles A. Holt, 1996. "Markets with posted prices: recent results from the laboratory," Investigaciones Economicas, FundaciĆ³n SEPI, vol. 20(3), pages 291-320, September.

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