Sequential Markets: An Experimental Investigation of Clower's Dual-Decision Hypothesis
Countless experimental studies have shown that markets converge quickly and efficiently to the competitive outcome under many trading institutions, particularly the double auction mechanism. This creates difficulties for Keynesian stories of unemployment creationâ€”which suggest a noncompetitive outcome in an essentially competitive world. Such stories were popular in the late 1960s and 1970s. One of these storiesâ€”the dual decision hypothesis of Clowerâ€”was seen then as the beginning of a story of unemployment. This article reports the results of an experiment designed to test this hypothesis. Specifically, we set up an experiment in which there are two sequential double-auction markets, in the first of which one good (labour) is traded, after which the second market (goods) is opened and the second good traded. We compare the outcome of our experiment with that of the competitive theory. One general finding is that not enough trade takes place in the two markets. In other words, the usual finding that competitive equilibrium is achieved in double-auction markets is not replicated in this sequential setting. Copyright Economic Science Association 1998
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- Bosch-Domenech, A. & Silvestre, J., 1995.
"Credit Constraint in General Equilibrium: Experimental Results,"
Department of Economics
95-07, California Davis - Department of Economics.
- Bosch-Domenech, Antoni & Silvestre, Joaquim, 1997. "Credit Constraints in General Equilibrium: Experimental Results," Economic Journal, Royal Economic Society, vol. 107(444), pages 1445-64, September.
- Bosch-Domenech, A. & Silvestre, J., 1995. "Credit Constraint in General Equilibrium: Experimental Results," Papers 95-07, California Davis - Institute of Governmental Affairs.
- Joaquim Silvestre & Antoni Bosch-Domenech, 2004. "Credit Constraints In General Equilibrium: Experimental Results," Working Papers 957, University of California, Davis, Department of Economics.
- Antoni Bosch-Domènech & Joaquim Silvestre, 1996. "Credit constraints in general equilibrium: Experimental results," Economics Working Papers 105, Department of Economics and Business, Universitat Pompeu Fabra.
- Timothy N. Cason & Daniel Friedman, 1997. "Price Formation in Single Call Markets," Econometrica, Econometric Society, vol. 65(2), pages 311-346, March.
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