Endogenous Choice Of Institution Under Supply And Demand Risks In Laboratory Forward And Spot Markets
Laboratory methods are used to investigate the impacts of supply and demand risks in a forward market on prices, quantities traded, and earnings when the choice of transacting in a forward or spot market is endogenous. Forward market activity dominates spot trading, with 80-90% of the trades taking place in the forward market regardless of how risk arises. Buyer earnings tend to be higher than earnings for sellers when there is risk. A correspondence exists between risk type and the relative increase in buyer earnings. Buyer earnings increase significantly when demand is random, and also when both supply and demand are random.
Volume (Year): 24 (1999)
Issue (Month): 02 (December)
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