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Markets as economizers of information: Field experimental examination of the “Hayek Hypothesis”

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  • Al-Ubaydli, Omar
  • Boettke, Peter

Abstract

The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the ‘Hayek hypothesis’: equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in the absence of price-taking behavior and centralized market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental market data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek’s theories.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27660.

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Date of creation: 22 Dec 2010
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Handle: RePEc:pra:mprapa:27660

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Keywords: price dynamics; entrepreneurs; field experiment; market process;

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