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An Experimental Examination of the Walrasian Tatonnement Mechanism

  • Corinne Bronfman
  • Kevin McCabe
  • David Porter
  • Stephen Rassenti
  • Vernon Smith

This is a systematic experimental comparison of the efficiency and competitive properties of a computerized multiunit tatonnement with or without a dynamic improvement rule, with or without publicity of order flow information. All versions of the tatonnement are comparatively less efficient than the continuous double auction. The tatonnement yields competitive prices, but both sides tend to underreveal demand/supply, causing inefficiency. Only the full-information, no-improvement-rule version of the tatonnement procedure approaches the efficiency of the double auction.

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Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 27 (1996)
Issue (Month): 4 (Winter)
Pages: 681-699

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Handle: RePEc:rje:randje:v:27:y:1996:i:winter:p:681-699
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