Market Dynamics in Edgeworth Exchange
AbstractEdgeworth exchange is the fundamental general equilibrium model, yet equilibrium predications and theories of price adjustment for this model remain untested. This paper reports an experimental test of Edgeworth exchange which demonstrates that prices and allocations converge sharply to the competitive equilibrium. Price convergence is evaluated with the tatonnement model, interpreted as a disequilibrium model of across- period price adjustment. Subsequently, the extent of within-period adjustment is compared to that of across-period adjustment. Since most observed price adjustment occurs within trading periods, price adjustment data is evaluated with two disequilibrium models of within- period trades. These models are the Geometric Mean model, which is formulated in this paper, and the Hahn process (Hahn and Negishi ). Price dynamics from experiment sessions fit the Geometric Mean model better than the Hahn process, and in addition, the Geometric Mean model provides direction for development of an Edgeworth exchange bargaining model.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0401006.
Length: 39 pages
Date of creation: 19 Jan 2004
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Note: Type of Document - pdf; prepared on WinXP; pages: 39; figures: 13
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Competitive equilibrium; disequilibrium dynamics; double auction; Edgeworth exchange; experimental economics; exchange economy; Hahn process; market dynamics;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-25 (All new papers)
- NEP-EXP-2004-01-25 (Experimental Economics)
- NEP-MIC-2004-01-25 (Microeconomics)
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