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Markets as economizers of information: Field experimental examination of the 'hayek hypothesis'

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  • Omar Al-Ubaydli
  • Peter Boettke

Abstract

The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the "Hayek hypothesis:" equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in the absence of price-taking behavior and centralized market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental market data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek's theories.

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  • Omar Al-Ubaydli & Peter Boettke, 2012. "Markets as economizers of information: Field experimental examination of the 'hayek hypothesis'," Framed Field Experiments 00195, The Field Experiments Website.
    • Handle: RePEc:feb:framed:00195
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    1. Omar Al-Ubaydli & John A. List, 2016. "Field Experiments in Markets," NBER Working Papers 22113, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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