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Testing Neoclassical Competitive Market Theory in the Field: Some Pilot Results

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Author Info
John A. List

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Abstract

Walrasian taˆtonnement has been a fundamental assumption in economics ever since Walras’ general equilibrium theory was introduced in 1874. Nearly a century after its introduction, Vernon Smith relaxed the Walrasian taˆtonnement assumption by showing that neoclassical competitive market theory explains the equilibrating forces in “double- auction” markets. I make a next step in this evolution by exploring the predictive power of neoclassical theory in decentralized naturally occurring markets. Using data gathered from two distinct markets— the sports card and collector pin markets—I find a tendency for exchange prices to approach the neoclassical competitive model prediction after a few market periods.

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File URL: http://karlan.yale.edu/fieldexperiments/pdf/List_Testing%20Neoclassical%20Competitive%20Market%20Theory%20in%20Decentralized%20markets.pdf
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Paper provided by The Field Experiments Website in its series Framed Field Experiments with number 0044.

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Length: 27 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:feb:framed:0044

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Web page: http://www.fieldexperiments.com

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  1. James T. Hong & Charles R. Plott, 1982. "Rate Filing Policies for Inland Water Transportation: An Experimental Approach," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 1-19, Spring. [Downloadable!] (restricted)
  2. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December. [Downloadable!] (restricted)
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. John A. List & David Lucking-Reiley, 2002. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 215-233, February. [Downloadable!] (restricted)
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  5. Joyce, Patrick, 1983. "Information and behavior in experimental markets," Journal of Economic Behavior & Organization, Elsevier, vol. 4(4), pages 411-424, December. [Downloadable!] (restricted)
  6. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1. [Downloadable!] (restricted)
  7. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
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  8. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-37, February. [Downloadable!] (restricted)
  9. Andreoni, James & Vesterlund, Lise, 2001. "Which is the Fair Sex? Gender Differences in Altruism," Staff General Research Papers 1951, Iowa State University, Department of Economics.
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This page was last updated on 2009-12-17.

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