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Measuring Allocative Efficiency in Experimental Markets: An Alterntive Approach

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  • W. Timothy Rhodus
  • Dennis R. Henderson

Abstract

An alternative approach to measuring allocative efficiency within experimental markets is proposed. This approach incorporates the traditional efficiency measure, the deadweight loss of economic surplus, and an additional measure that captures income (value) redistribution between buyers and sellers resulting from individual transactions at prices that deviate from equilibrium. An extension is made to construct an additional measure to further discriminate between markets that appear similar in terms of pricing efficiency, which reflects the rate at which prices converge toward equilibrium. Previous conclusions regarding the relative pricing efficiency of different experimental markets need to be reexamined using the more comprehensive measures.

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  • W. Timothy Rhodus & Dennis R. Henderson, 1988. "Measuring Allocative Efficiency in Experimental Markets: An Alterntive Approach," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 273-279.
    • Handle: RePEc:oup:revage:v:10:y:1988:i:2:p:273-279.
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    File URL: http://hdl.handle.net/10.1093/aepp/10.2.273
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