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Testing Neoclassical Competitive Theory in Multilateral Decentralized Markets

  • John A. List

Walrasian tatonnement has been a fundamental assumption in economics ever since Walrasian general equilibrium theory was introduced in 1874. Nearly a century after its introduction, Vernon Smith relaxed the Walrasian tatonnement assumption by showing that neoclassical competitive market theory explains the equilibrating forces in double-auction markets. I make a next step in this evolution by exploring the predictive power of neoclassical theory in decentralized naturally occurring markets. Using data gathered from two distinct markets--the sports card and collector pin markets--I find a tendency for exchange prices to approach the neoclassical competitive model prediction after a few market periods.

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File URL: http://www.jstor.org/stable/pdfplus/10.1086/422564
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File URL: http://www.jstor.org/stable/full/10.1086/422564
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): 5 (October)
Pages: 1131-1156

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Handle: RePEc:ucp:jpolec:v:112:y:2004:i:5:p:1131-1156
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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