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Markets as Economizers of Information: Field Experimental Examination of the "Hayek Hypothesis"

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Listed:
  • Omar Al-Ubaydli

    () (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

  • Peter Boettke

    () (Department of Economics, George Mason University)

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.

Suggested Citation

  • Omar Al-Ubaydli & Peter Boettke, 2011. "Markets as Economizers of Information: Field Experimental Examination of the "Hayek Hypothesis"," Working Papers 1025, George Mason University, Interdisciplinary Center for Economic Science.
  • Handle: RePEc:gms:wpaper:1025
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    References listed on IDEAS

    as
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    Cited by:

    1. Omar Al-Ubaydli & John A. List, 2016. "Field Experiments in Markets," NBER Working Papers 22113, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    price dynamics; entrepreneurs; field experiment; market process;

    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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