We define and examine the performance of three minimal strategic market games (sell-all, buy-sell, and double auction) in laboratory relative to the predictions of theory. Unlike open or partial equilibrium settings of most other experiments, these closed exchange economies have limited amounts of cash to facilitate transactions, and include feedback. General equilibrium theory, since it abstracts away from market mechanisms and has no role for money or credit, makes no predictions about how the paths of convergence to the competitive equilibrium may differ across alternative mechanisms. Introduction of markets and money as carriers of process creates the possibility of motion. The laboratory data reveal different paths, and different levels of allocative efficiency in the three settings. The results suggest that abstracting away from all institutional details does not help understand dynamic aspects of market behavior. For example, the oligopoly effect of feedback from buying an endowed good is missed. Inclusion of mechanism differences into theory may enhance our understanding of important aspects of markets and money and help link conventional equilibrium analysis with dynamics.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Find related papers by JEL classification: C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)