Market Dynamics in Edgeworth Exchange
Edgeworth exchange is the fundamental general equilibrium model, yet equilibrium predications and theories of price adjustment for this model remain untested. This paper reports an experimental test of Edgeworth exchange which demonstrates that prices and allocations converge sharply to the competitive equilibrium. Price convergence is evaluated with the tatonnement model, interpreted as a disequilibrium model of across- period price adjustment. Subsequently, the extent of within-period adjustment is compared to that of across-period adjustment. Since most observed price adjustment occurs within trading periods, price adjustment data is evaluated with two disequilibrium models of within- period trades. These models are the Geometric Mean model, which is formulated in this paper, and the Hahn process (Hahn and Negishi ). Price dynamics from experiment sessions fit the Geometric Mean model better than the Hahn process, and in addition, the Geometric Mean model provides direction for development of an Edgeworth exchange bargaining model.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, vol. 107(443), pages 1054-1078, July.
- Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
- Anderson, Christopher M. & Plott, Charles R. & Shimomura, K.-I.Ken-Ichi & Granat, Sander, 2004.
"Global instability in experimental general equilibrium: the Scarf example,"
Journal of Economic Theory,
Elsevier, vol. 115(2), pages 209-249, April.
- Anderson, Christopher M. & Granat, Sander & Plott, Charles R. & Shimomura, Ken-Ichi, 2000. "Global Instability in Experimental General Equilibrium: The Scarf Example," Working Papers 1086, California Institute of Technology, Division of the Humanities and Social Sciences.
- Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
- Gjerstad, S. & Dickhaut, J., 1995.
"Price Formation in Double Auctions,"
284, Minnesota - Center for Economic Research.
- Steven Gjerstad, 2003. "The Impact of Pace in Double Auction Bargaining," Levine's Bibliography 666156000000000192, UCLA Department of Economics.
- Herbert E. Scarf, 1959. "Some Examples of Global Instability of the Competitive Equilibrium," Cowles Foundation Discussion Papers 79, Cowles Foundation for Research in Economics, Yale University.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0401006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.