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Quantitative Restrictions in Experimental Posted-offer Markets

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  • Kujal, Praveen

Abstract

The effect of imposing binding and non-binding quantity restrictions upon price convergence in posted-offer markets is discussed. Unlike in the price control experiments prices do not jump after the removal of quantity restrictions. Further, a surprising property of prices was observed in these experiments, prices converge from below the competitive equilibrium. This result contradicted the well established empirical regularity that price convergence is from above the competitive equilibrium in Posted-Offer markets. Thus, the asymmetric distribution of surplus, or the imposition of quotas themselves affected price convergence in the quota experiments.

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This chapter was published in:

  • Charles R. Plott & Vernon L. Smith (ed.), 2008. "Handbook of Experimental Economics Results," Handbook of Experimental Economics Results, Elsevier, edition 1, volume 1, number 1, June.
    This item is provided by Elsevier in its series Handbook of Experimental Economics Results with number 1-28.

    Handle: RePEc:eee:expchp:1-28

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    Web page: http://www.elsevierdirect.com/product.jsp?isbn=9780444826428

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    1. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers 106, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Plott, Charles R, 1983. "Externalities and Corrective Policies in Experimental Markets," Economic Journal, Royal Economic Society, vol. 93(369), pages 106-27, March.
    3. Isaac, R Mark & Plott, Charles R, 1981. "Price Controls and the Behavior of Auction Markets: An Experimental Examination," American Economic Review, American Economic Association, vol. 71(3), pages 448-59, June.
    4. Ketcham, Jon & Smith, Vernon L & Williams, Arlington W, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Wiley Blackwell, vol. 51(4), pages 595-614, October.
    5. Kujal, Praveen, 1992. "Asymmetric surplus distribution and the price convergence path in posted-offer markets : A note," Economics Letters, Elsevier, vol. 39(1), pages 33-36, May.
    6. Coursey, Don L & Smith, Vernon L, 1983. "Price Controls in a Posted Offer Market," American Economic Review, American Economic Association, vol. 73(1), pages 218-21, March.
    7. Kujal, Praveen, 1994. "Firm-specific output limits in a posted offer market: Distributive and efficiency effects," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 257-269, October.
    8. Smith, Vernon L & Williams, Arlington W, 1981. "On Nonbinding Price Controls in a Competitive Market," American Economic Review, American Economic Association, vol. 71(3), pages 467-74, June.
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