The Nature of Excess: Using Randomized Treatments to Investigate Price Dynamics
AbstractThis study explores empirically the price dynamics within two distinct market institutions – a double oral auction, which resembles modern asset markets, and a bilateral exchange market, which represents markets that have existed for centuries. To provide a theoretical basis to our investigation, we test and compare the excess supply model (Walras (1874, 1877, 1889, 1896)) and the excess rent model (Smith (1962, 1965)) in both market institutions. Our approach is unique in that we make use of appropriate demand and supply systems coupled with randomization of the main treatment variable to discriminate between the theories. All previous efforts, including Smith's (1965) seminal experiments, use designs that cannot appropriately parse the models. We report several insights, perhaps most importantly, we consistently reject the Walrasian model in favor of the excess rent model, regardless of market institution. This finding has important implications both positively and normatively.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16319.
Date of creation: Aug 2010
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.