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An Experimental Examination of the Walrasian Tatonnement Mechanism


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


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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  • Bronfman, Corinne & McCabe, Kevin & Porter, David & Rassenti, Stephen & Smith, Vernon, 1992. "An Experimental Examination of the Walrasian Tatonnement Mechanism," Working Papers 824, California Institute of Technology, Division of the Humanities and Social Sciences.
  • Handle: RePEc:clt:sswopa:824

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    Cited by:

    1. Rajkamal Iyer & Asim Ijaz Khwaja & Erzo F. P. Luttmer & Kelly Shue, 2016. "Screening Peers Softly: Inferring the Quality of Small Borrowers," Management Science, INFORMS, vol. 62(6), pages 1554-1577, June.
    2. Eaves, James & Williams, Jeffrey & Power, Gabriel J., 2016. "Do traders strategically time their pledges during real-world Walrasian auctions?," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 109-118.
    3. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, July.

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