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Advance Production in Experimental Markets


  • Stuart Mestelman
  • Douglas Welland


The effects of advance production in posted offer and double auction markets are investigated. Previously observed differences between these institutions in mean contract prices and in the distribution of producers' and consumers' surpluses under the production to demand condition disappear when sellers make output decisions and incur production costs prior to the start of trading. The double auction institution remains more efficient under advance production. The results suggest that the differential effects of alternative trading institutions on market outcomes may be partially offset by the production conditions characterizing a market.

Suggested Citation

  • Stuart Mestelman & Douglas Welland, 1988. "Advance Production in Experimental Markets," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 641-654.
  • Handle: RePEc:oup:restud:v:55:y:1988:i:4:p:641-654.

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    References listed on IDEAS

    1. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76, pages 316-316.
    2. Jeremy I. Bulow & John Geanakoplos & Paul D. Klemperer, 1983. "Multimarket Oligopoly," Cowles Foundation Discussion Papers 674, Cowles Foundation for Research in Economics, Yale University.
    3. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March.
    4. McCulloch, Rachel & Johnson, Harry G, 1973. "A Note on Proportionally Distributed Quotas," American Economic Review, American Economic Association, vol. 63(4), pages 726-732, September.
    5. Gene M. Grossman, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 96(4), pages 583-603.
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    Cited by:

    1. Jim Engle-Warnick & Bradley Ruffle, 2006. "Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets," Departmental Working Papers 2006-12, McGill University, Department of Economics.
    2. Muren, Astri, 2000. "Quantity precommitment in an experimental oligopoly market," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 147-157, February.
    3. Jason Shachat & Zhenxuan Zhang, 2017. "The Hayek Hypothesis and Long‐run Competitive Equilibrium: An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 127(599), pages 199-228, February.
    4. Mestelman, Stuart & Welland, Douglas, 1995. "Experience and inventory management in double-auction markets," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 35-48, January.
    5. Jordi Brandts & Pablo Guillen, 2004. "Collusion and Fights in an Experiment with Price-Setting Firms and Production in Advance," Working Papers 141, Barcelona Graduate School of Economics.
    6. Collins, Sean M. & James, Duncan & Servátka, Maroš & Woods, Daniel, 2017. "Price-setting and attainment of equilibrium: Posted offers versus an administered price," Games and Economic Behavior, Elsevier, vol. 106(C), pages 277-293.
    7. Doyon, Maurice & Novakovic, Andrew M., 1997. "An Application of Experimental Economics to Agricultural Policies: The Case of U.S. Dairy Deregulation on Farm-Level Markets," Research Bulletins 122807, Cornell University, Department of Applied Economics and Management.
    8. Phillips, Owen R. & Menkhaus, Dale J. & Krogmeier, Joseph L., 2001. "Production-to-order or production-to-stock: the endogenous choice of institution in experimental auction markets," Journal of Economic Behavior & Organization, Elsevier, vol. 44(3), pages 333-345, March.
    9. Davis, Douglas D., 1999. "Advance production and Cournot outcomes: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 59-79, September.
    10. Owen Phillips & Dale Menkhaus & Joseph Krogmeier, 2001. "Laboratory Behavior in Spot and Forward Auction Markets," Experimental Economics, Springer;Economic Science Association, vol. 4(3), pages 243-256, December.
    11. Robert Moir, 1998. "A Monte Carlo Analysis of the Fisher Randomization Technique: Reviving Randomization for Experimental Economists," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 87-100, June.

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