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Testing neoclassical competitive theory in multi-lateral decentralized markets

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  • John List

Abstract

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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  • John List, 2004. "Testing neoclassical competitive theory in multi-lateral decentralized markets," Framed Field Experiments 00176, The Field Experiments Website.
  • Handle: RePEc:feb:framed:00176
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