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Extracting Valuable Data from Classroom Trading Pits

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  • Ted Bergstrom

    (UCSB)

Abstract

Edward Chamberlin, who initiated classroom market experiments, used the results of these experiments to argue that competitive equilibrium performs poorly in explaining the outcomes of real markets. Vernon Smith altered the design of Chamberlin's experiment to increase the amount of price information available to traders and in classroom experiments with this design found that trading outcomes were close to those predicted by competitive theory. This paper examines results of classroom trading experiments using the design found in Experiments with Economic Principles, an introductory economics text by Ted Bergstrom and John Miller. The procedure in this experiment is intermediate between that of Chamberlin and that of Smith. We have collected data on transaction prices and quantities from a large number of classroom experiments using this design. We compare the experimental outcomes with the predictions made by competitive equilibriumtheory and by a simple profit-splitting theory. Evidence suggests that neither theory is entirely successful, though in the first rounds of trading there seems to be a significant amount of profit-splitting and as traders become more experienced, outcomes are closer to those predicted by competitive theory.

Suggested Citation

  • Ted Bergstrom, 2004. "Extracting Valuable Data from Classroom Trading Pits," Experimental 0407002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpex:0407002
    Note: Type of Document - pdf; pages: 18
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/exp/papers/0407/0407002.pdf
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    References listed on IDEAS

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    1. Robert E. Kuenne (ed.), 1990. "Microeconomics," Books, Edward Elgar Publishing, volume 0, number 564, December.
    2. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 111-111.
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    Cited by:

    1. Humberto Llavador & Marcus Giamattei, 2017. "Teaching microeconomic principles with smartphones – lessons from classroom experiments with classEx," Economics Working Papers 1584, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Miller, John H. & Tumminello, Michele, 2015. "Bazaar economics," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 163-181.
    3. Ted Bergstrom, 2004. "Experimental Economics and Chamberlin's Excess Trading Conjecture," Experimental 0407001, University Library of Munich, Germany.

    More about this item

    Keywords

    experimental economics; classroom experiments; Edward Chamberlin; Vernon Smith; trading pits; demand and supply; profit- splitting; random matching; excess trading;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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