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Endogenous Choice Of Institution Under Supply And Demand Risks In Laboratory Forward And Spot Markets

  • Menkhaus, Dale J.
  • Bastian, Christopher T.
  • Phillips, Owen R.
  • O'Neill, Patrick D.
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    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.

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    File URL: http://purl.umn.edu/30793
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    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 24 (1999)
    Issue (Month): 02 (December)
    Pages:

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    Handle: RePEc:ags:jlaare:30793
    Contact details of provider: Web page: http://waeaonline.org/

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    1. Mestelman, Stuart & Welland, Deborah & Welland, Douglas, 1987. "Advance production in posted offer markets," Journal of Economic Behavior & Organization, Elsevier, vol. 8(2), pages 249-264, June.
    2. Noussair, Charles N & Plott, Charles R & Riezman, Raymond G, 1995. "An Experimental Investigation of the Patterns of International Trade," American Economic Review, American Economic Association, vol. 85(3), pages 462-91, June.
    3. Krogmeier, Joseph L. & Menkhaus, Dale J. & Phillips, Owen R. & Schmitz, John D., 1997. "An Experimental Economics Approach To Analyzing Price Discovery In Forward And Spot Markets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(02), December.
    4. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
    5. Boehlje, Michael, 1996. "Industrialization of Agriculture: What are the Implications?," Choices, Agricultural and Applied Economics Association, vol. 11(1).
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