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Impact of Ethnicities on Market Outcome: Results of Market Experiments in Kenya

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  • Ken-Ichi Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Takehiko Yamato

    (Department of Social Engineering, Graduate School of Decision Science and Technology, Tokyo Institute of Technology, Japan)

Abstract

We study market exchange in the laboratory by a multiethnic experiment in Kenya. The subjects of our experiment are of three ethnicities, Kikuyu, Luo, and Kalenjin. Our model contains two types of consumers and two kinds of commodities, and three competitive equilibria exist. The two equilibria with the lowest, and highest relative prices are beneficial for one type of the consumers, and the intermediate price gives an equitable allocation. The tatonnement dynamics however predict that relative prices diverge from the intermediate equilibrium towards the lowest equilibrium or the highest equilibrium depending on initial prices. In order to examine how much effect the ethnicities of subjects have on the equilibrium selection, we conducted manual experiments of pit market trading with different combinations of ethnicities of subjects. Our result shows strong support for the convergence to the intermediate equilibrium when Kalenjin subjects participated, whereas no such data are obtained without them. In addition, the frequencies of transactions with Kalenjin subjects were significantly less than that with the other subjects only, and the less frequent transactions resulted in the more efficient outcomes of the experimental market.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-10.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2011-10.

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Length: 26 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:kob:dpaper:dp2011-10

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Keywords: Economic Experiment; Kenya; Pit Market; Perfect Competition; Multiple Equilibria;

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  1. Shapley, Lloyd S & Shubik, Martin, 1977. "An Example of a Trading Economy with Three Competitive Equilibria," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 873-75, August.
  2. Anderson, Christopher M. & Granat, Sander & Plott, Charles R. & Shimomura, Ken-Ichi, 2000. "Global Instability in Experimental General Equilibrium: The Scarf Example," Working Papers 1086, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December.
  4. Juergen Huber & Martin Shubik & Shyam Sunder, 2009. "Default Penalty as a Disciplinary and Selection Mechanism in Presence of Multiple Equilibria," Cowles Foundation Discussion Papers 1730, Cowles Foundation for Research in Economics, Yale University.
  5. Cason, T.N. & Saijo, T. & Yamato, T., 2000. "Voluntary Participation and Spite in Public Good Provision Experiments: an International Comparison," ISER Discussion Paper 0491, Institute of Social and Economic Research, Osaka University.
  6. Herbert E. Scarf, 1959. "Some Examples of Global Instability of the Competitive Equilibrium," Cowles Foundation Discussion Papers 79, Cowles Foundation for Research in Economics, Yale University.
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