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Perishable goods versus re-tradable assets: A theoretical reappraisal of a fundamental dichotomy

In: Handbook of Experimental Finance

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  • Sabiou M. Inoua
  • Vernon L. Smith

Abstract

Experimental results on market behavior establish a lower stability and efficiency of markets for durable re-tradable assets compared to markets for non-durable, or perishable, goods. In this chapter, we revisit this known but underappreciated dichotomy of goods in the light of our theory of competitive market price formation, and we emphasize the fundamental nature of the concept of asset re-tradability in neoclassical finance through a simple reformulation of the famous no-trade and no-arbitrage theorems.

Suggested Citation

  • Sabiou M. Inoua & Vernon L. Smith, 2022. "Perishable goods versus re-tradable assets: A theoretical reappraisal of a fundamental dichotomy," Chapters, in: Sascha Füllbrunn & Ernan Haruvy (ed.), Handbook of Experimental Finance, chapter 15, pages 162-171, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20035_15
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    1. Inoua, Sabiou M. & Smith, Vernon L., 2023. "A classical model of speculative asset price dynamics," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

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