IDEAS home Printed from https://ideas.repec.org/p/bep/dewple/2004-1-1083.html
   My bibliography  Save this paper

Self-interest, Social Wealth, and Competition as a Discovery Procedure

Author

Listed:
  • Roland Kirstein

    (University of Saarland)

  • Dieter Schmidtchen

    (Universität des Saarlandes)

Abstract

In Economics, as in any social science, empirical tests of theoretical results face a problem: researchers are unable to reproduce the whole economy (or at least its relevant parts) in their laboratories. Nowadays, Experimental Economics uses stylized experiments, drawing on the experience of Psychology, to test at least the basic assumptions of the economic theory of human behavior. Even classroom experiments may serve this purpose. This paper describes a simple classroom experiment that serves as an empirical test of Adam Smith's invisible- hand hypothesis. Furthermore, it demonstrates to the students that competition acts as a discovery procedure. The experiment is of high didactical value, since the students gain insights into empirical research and experience how markets work.

Suggested Citation

  • Roland Kirstein & Dieter Schmidtchen, "undated". "Self-interest, Social Wealth, and Competition as a Discovery Procedure," German Working Papers in Law and Economics 2004-1-1083, Berkeley Electronic Press.
    • Handle: RePEc:bep:dewple:2004-1-1083
    Note: oai:bepress:
    as

    Download full text from publisher

    File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1083&context=gwp
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Smith,Vernon L., 2005. "Bargaining and Market Behavior," Cambridge Books, Cambridge University Press, number 9780521021487.
    2. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    3. Smith, Vernon L, 1982. "Markets as Economizers of Information: Experimental Examination of the "Hayek Hypothesis"," Economic Inquiry, Western Economic Association International, vol. 20(2), pages 165-179, April.
    4. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March.
    5. Bradley J. Ruffle, 2003. "Competitive Equilibrium and Classroom Pit Markets," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(2), pages 123-137, January.
    6. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 111-111.
    7. John C. Eckalbar, 2002. "An Extended Duopoly Game," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(1), pages 41-52, January.
    8. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kirstein, Roland & Schmidtchen, Dieter, 2003. "Self-interest, Social Wealth, and Competition as a Discovery Procedure : A classroom experiment that makes the "invisible hand" visible," CSLE Discussion Paper Series 2003-08, Saarland University, CSLE - Center for the Study of Law and Economics.
    2. Leitner, Johannes & Leopold-Wildburger, Ulrike, 2011. "Experiments on forecasting behavior with several sources of information - A review of the literature," European Journal of Operational Research, Elsevier, vol. 213(3), pages 459-469, September.
    3. Kimbrough, Erik O. & Smyth, Andrew, 2018. "Testing the boundaries of the double auction: The effects of complete information and market power," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 372-396.
    4. Huber, Juergen & Shubik, Martin & Sunder, Shyam, 2010. "Three minimal market institutions with human and algorithmic agents: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 70(2), pages 403-424, November.
    5. Fiore, Annamaria, 2009. "Experimental Economics: Some Methodological Notes," MPRA Paper 12498, University Library of Munich, Germany.
    6. Bolton, Gary E. & Ockenfels, Axel, 2014. "Does laboratory trading mirror behavior in real world markets? Fair bargaining and competitive bidding on eBay," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 143-154.
    7. Yannick Gabuthy & Nicolas Jacquemet, 2013. "Analyse économique du droit et méthode expérimentale," Economie & Prévision, La Documentation Française, vol. 0(1), pages 121-145.
    8. Gjerstad, Steven & Dickhaut, John, 1998. "Price Formation in Double Auctions," Games and Economic Behavior, Elsevier, vol. 22(1), pages 1-29, January.
    9. Croson, Rachel & Gächter, Simon, 2010. "The science of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 122-131, January.
    10. Steven D. Levitt & John A. List, 2007. "Viewpoint: On the generalizability of lab behaviour to the field," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 347-370, May.
    11. Patrick Harvey & W. David Walls, 2003. "Laboratory markets in counterfeit goods: Hong Kong versus Las Vegas," Applied Economics Letters, Taylor & Francis Journals, vol. 10(14), pages 883-887.
    12. repec:hal:wpaper:halshs-00746617 is not listed on IDEAS
    13. Arango, Santiago & Moxnes, Erling, 2012. "Commodity cycles, a function of market complexity? Extending the cobweb experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 321-334.
    14. Paul Brewer & Maria Huang & Brad Nelson & Charles Plott, 2002. "On the Behavioral Foundations of the Law of Supply and Demand: Human Convergence and Robot Randomness," Experimental Economics, Springer;Economic Science Association, vol. 5(3), pages 179-208, December.
    15. Wheatley, W. Parker & Buhr, Brian L. & Dipietre, Dennis, 2001. "E-Commerce In Agriculture: Development, Strategy, And Market Implications," Staff Papers 13938, University of Minnesota, Department of Applied Economics.
    16. Schilirò, Daniele & Graziano, Mario, 2011. "Scelte e razionalità nei modelli economici: un'analisi multidisciplinare [Choices and rationality in economic models: a multidisciplinary analysis]," MPRA Paper 31910, University Library of Munich, Germany.
    17. James C. Cox & Vjollca Sadiraj, 2018. "Incentives," Experimental Economics Center Working Paper Series 2018-01, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    18. Menkhaus, Dale J. & Bastian, Christopher T. & Yakunina, Alla V. & Esipov, Victor E., 1997. "Helping Russian Students See the Invisible Hand," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35755, Western Agricultural Economics Association.
    19. Vipin P. Veetil, 2016. "The Mythology of Capital in the Twenty-First Century," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 31(Spring 20), pages 21-36.
    20. Alessandra Casella & Aniol Llorente-Saguer & Thomas R. Palfrey, 2012. "Competitive Equilibrium in Markets for Votes," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 593-658.
    21. 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.

    More about this item

    Keywords

    Hayek-Hypothesis; Efficiency; Double Oral Auctions;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bep:dewple:2004-1-1083. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: http://www.bepress.com/gwp/default/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.