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Price rigidities and institutional variations in markets with posted prices (*)

Listed author(s):
  • Douglas D. Davis

    (Department of Economics, Virginia Commonwealth University, Richmond, VA 23284-4000, USA)

  • Charles A. Holt

    (Department of Economics, University of Virginia, Charlottesville, VA 22901, USA)

Standard laboratory posted-offer markets respond slowly and incompletely to demand shocks. In these one-sided markets, where sellers control the setting of prices, very little information is transmitted via the process of exchange. For this reason, traders have trouble distinguishing randomness in their own experience from changes in market fundamentals. This paper reports the results of twelve laboratory markets conducted to assess whether some common variants to standard posted-offer rules can correct the adjustment deficiences. Although discounting, multiple postings and excess demand information all improve performance, we find that response remains poor, and efficiencies low.

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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 9 (1996)
Issue (Month): 1 ()
Pages: 63-80

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Handle: RePEc:spr:joecth:v:9:y:1996:i:1:p:63-80
Note: Received: December 5, 1994; revised version August 8, 1995
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