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Posted - Offer Markets In Near Continuous Time: an Experimental Investigation

  • Douglas D. Davis

    ()

    (Department of Economics, VCU School of Business)

  • Oleg Korenok

    ()

    (Department of Economics, Virginia Commonwealth University)

This paper reports an experiment conducted to evaluate a ‘near continuous’ variant of the posted-offer trading institution, where the number of periods in a market session is increased by reducing sharply each period’s maximum length. Experimental results suggest that although decisions in time-truncated periods are not equivalent to periods of longer duration, extensive repetition improves considerably the drawing power of equilibrium predictions in some challenging environments. Nevertheless, significant deviations remain in the near continuous framework. We also observe that the extra data collected in the near continuous framework allows new insights into price convergence and price signaling.

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File URL: http://www.people.vcu.edu/%7Edddavis/papers/MS8733_FINAL.pdf
File Function: Final version, 2007
Download Restriction: no

Paper provided by VCU School of Business, Department of Economics in its series Working Papers with number 0504.

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Length: 54 pages
Date of creation: Nov 2005
Date of revision: 2007
Publication status: Forthcoming in Economic Inquiry
Handle: RePEc:vcu:wpaper:0504
Contact details of provider: Postal: Box 844000, Richmond, VA 23284-4000
Phone: 804/828-1717
Fax: (804)828-8884
Web page: http://www.business.vcu.edu/economics

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  1. Michael C. Davis & James D. Hamilton, 2003. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," NBER Working Papers 9741, National Bureau of Economic Research, Inc.
  2. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  3. Ketcham, Jon & Smith, Vernon L & Williams, Arlington W, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Wiley Blackwell, vol. 51(4), pages 595-614, October.
  4. Davis, Douglas D. & Williams, Arlington W., 1997. "The effects of nonstationarities on performance in call markets," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 39-54, January.
  5. Alger, Dan, 1987. "Laboratory Tests of Equilibrium Predictions with Disequilibrium Data," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 105-45, January.
  6. Edward L. Millner & Michael D. Pratt & Robert J. Reilly, 1990. "Contestability in Real-Time Experimental Flow Markets," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 584-599, Winter.
  7. Deck, Cary A. & Wilson, Bart J., 2008. "Experimental gasoline markets," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 134-149, July.
  8. Douglas D. Davis & Charles A. Holt, 1996. "Price rigidities and institutional variations in markets with posted prices (*)," Economic Theory, Springer, vol. 9(1), pages 63-80.
  9. repec:kap:expeco:v:5:y:2002:i:2:p:91-110 is not listed on IDEAS
  10. Cary A. Deck & Bart J. Wilson, 2003. "Automated Pricing Rules in Electronic Posted Offer Markets," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 208-223, April.
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