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Markets as economizers of information: Field experimental examination of the “Hayek Hypothesis”

  • Al-Ubaydli, Omar
  • Boettke, Peter

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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27660.

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Date of creation: 22 Dec 2010
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Handle: RePEc:pra:mprapa:27660
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  1. John List & Jonathan Alevy & Michael Haigh, 2005. "Information cascades: Evidence from a field experiment with financial market professionals," Framed Field Experiments 00116, The Field Experiments Website.
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  14. Wolinsky, Asher, 1987. "Information Revelation in a Market with Pairwise Meetings," The Warwick Economics Research Paper Series (TWERPS) 284, University of Warwick, Department of Economics.
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