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Testing neoclassical competitive theory in multi-lateral decentralized markets

Listed author(s):
  • John 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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Paper provided by The Field Experiments Website in its series Framed Field Experiments with number 00176.

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Date of creation: 2004
Handle: RePEc:feb:framed:00176
Contact details of provider: Web page: http://www.fieldexperiments.com

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  1. John A. List & David Lucking-Reiley, 2002. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 215-233, February.
  2. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-137, February.
  3. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
  4. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-764, May.
  5. 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.
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