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Posted - Offer Markets In Near Continuous Time: an Experimental Investigation

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  • Douglas D. Davis

    ()
    (Department of Economics, VCU School of Business)

  • Oleg Korenok

    ()
    (Department of Economics, Virginia Commonwealth University)

Abstract

This paper reports an experiment conducted to evaluate a ‘near continuous’ variant of the posted-offer trading institution, where the number of periods in a market session is increased by reducing sharply each period’s maximum length. Experimental results suggest that although decisions in time-truncated periods are not equivalent to periods of longer duration, extensive repetition improves considerably the drawing power of equilibrium predictions in some challenging environments. Nevertheless, significant deviations remain in the near continuous framework. We also observe that the extra data collected in the near continuous framework allows new insights into price convergence and price signaling.

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File URL: http://www.people.vcu.edu/%7Edddavis/papers/MS8733_FINAL.pdf
File Function: Final version, 2007
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Bibliographic Info

Paper provided by VCU School of Business, Department of Economics in its series Working Papers with number 0504.

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Length: 54 pages
Date of creation: Nov 2005
Date of revision: 2007
Publication status: Forthcoming in Economic Inquiry
Handle: RePEc:vcu:wpaper:0504

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Keywords: experiment; monopoly; pricing; price signaling;

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References

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  1. Deck, Cary A. & Wilson, Bart J., 2008. "Experimental gasoline markets," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 67(1), pages 134-149, July.
  2. Davis, Michael C & Hamilton, James D, 2004. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(1), pages 17-37, February.
  3. repec:kap:expeco:v:5:y:2002:i:2:p:91-110 is not listed on IDEAS
  4. Edward L. Millner & Michael D. Pratt & Robert J. Reilly, 1990. "Contestability in Real-Time Experimental Flow Markets," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 584-599, Winter.
  5. Alger, Dan, 1987. "Laboratory Tests of Equilibrium Predictions with Disequilibrium Data," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(1), pages 105-45, January.
  6. Cary A. Deck & Bart J. Wilson, 2003. "Automated Pricing Rules in Electronic Posted Offer Markets," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 41(2), pages 208-223, April.
  7. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 264-72, March.
  8. Douglas D. Davis & Charles A. Holt, 1996. "Price rigidities and institutional variations in markets with posted prices (*)," Economic Theory, Springer, Springer, vol. 9(1), pages 63-80.
  9. Ketcham, Jon & Smith, Vernon L & Williams, Arlington W, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(4), pages 595-614, October.
  10. Davis, Douglas D. & Williams, Arlington W., 1997. "The effects of nonstationarities on performance in call markets," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 32(1), pages 39-54, January.
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Cited by:
  1. Deck, Cary & Gu, Jingping, 2012. "Price increasing competition? Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 84(3), pages 730-740.
  2. Douglas Davis & Oleg Korenok & Robert Reilly, 2010. "Cooperation without coordination: signaling, types and tacit collusion in laboratory oligopolies," Experimental Economics, Springer, Springer, vol. 13(1), pages 45-65, March.
  3. Sara Ellison & Christopher M. Snyder, 2014. "An Empirical Study of Pricing Strategies in an Online Market with High-Frequency Price Information," CESifo Working Paper Series 4655, CESifo Group Munich.
  4. Douglas D. Davis & Korenok Oleg & Robert Reilly, 2007. "Re-matching, Information and Sequencing Effects in Posted Offer Markets," Working Papers, VCU School of Business, Department of Economics 0701, VCU School of Business, Department of Economics, revised Oct 2007.
  5. Douglas D. Davis, 2006. "Pure Numbers Effects, Market Power, and Tacit Collusion in Posted Offer Markets," Working Papers, VCU School of Business, Department of Economics 0603, VCU School of Business, Department of Economics, revised Jan 2009.
  6. Deck, Cary A. & Wilson, Bart J., 2008. "Experimental gasoline markets," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 67(1), pages 134-149, July.

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