Testing Neoclassical Competitive Theory in Multilateral Decentralized Markets

Walrasian tâtonnement has been a fundamental assumption in economics ever since Walras’ general equilibrium theory was introduced in 1874. Nearly a century after its introduction, Vernon Smith relaxed the Walrasian tâtonnement assumption by showing that neoclassical competitive market theory explains the equilibrating forces in “double‐auction” markets. I make a next step in this evolution by exploring the predictive power of neoclassical theory in decentralized naturally occurring markets. Using data gathered from two distinct markets—the sports card and collector pin markets—I find a tendency for exchange prices to approach the neoclassical competitive model prediction after a few market periods.

[1]  V. Smith.  Papers in experimental economics , 1991 .

[2]  Charles R. Plott,et al.  DIVISION OF THE HUMANITIES AND SOCIAL SCIENCES CALIFORNIA INSTITUTE OF TECHNOLOGY PASADENA, CALIFORNIA 91125 ON THE BEHAVIORAL FOUNDATIONS OF THE LAW OF SUPPLY AND DEMAND: HUMAN CONVERGENCE AND ROBOT RANDOMNESS , 2001 .

[3]  Robert A. Moffitt,et al.  A COMPUTATIONALLY EFFICIENT QUADRATURE PROCEDURE FOR THE ONE-FACTOR MULTINOMIAL PROBIT MODEL , 1982 .

[4]  G. Becker,et al.  Irrational Behavior and Economic Theory , 1962, Journal of Political Economy.

[5]  张谷.  实验经济学（Experimental Economics）研究思路及成果应用简述 , 1994 .

[6]  John A List,et al.  Testing neoclassical competitive market theory in the field , 2002, Proceedings of the National Academy of Sciences of the United States of America.

[7]  David Lucking-Reiley,et al.  The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign , 2002, Journal of Political Economy.

[8]  V. Smith.  An Experimental Study of Competitive Market Behavior , 1962, Journal of Political Economy.

[9]  G. Harrison,et al.  Field experiments , 1924, The Journal of Agricultural Science.

[10]  Charles R. Plott,et al.  Rate Filing Policies for Inland Water Transportation: An Experimental Approach , 1982 .

[11]  Charles R. Plott,et al.  The Effects of Market Practices in Oligopolistic Markets: An Experimental Examination of the Ethyl Case , 1984 .

[12]  C. A. Holt,et al.  5. Industrial Organization: A Survey of Laboratory Research , 1995 .

[13]  E. Chamberlin,et al.  An Experimental Imperfect Market , 1948, Journal of Political Economy.

[14]  M. Satterthwaite,et al.  Efficient Mechanisms for Bilateral Trading , 1983 .

[15]  Dhananjay K. Gode,et al.  Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality , 1993, Journal of Political Economy.

[16]  Colin Camerer.  Behavioral Game Theory: Experiments in Strategic Interaction , 2003 .

[17]  J. Andreoni,et al.  Which is the Fair Sex? Gender Differences in Altruism , 2001 .

[18]  J. List.  Does market experience eliminate market anomalies , 2003 .

[19]  Patrick Joyce.  Information and behavior in experimental markets , 1983 .

[20]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[21]  Vernon L. Smith,et al.  Experimental Auction Markets and the Walrasian Hypothesis , 1965, Journal of Political Economy.

[22]  Research on Pricing in a Gas Transportation Network , 1988 .

[23]  Charles A. Holt,et al.  Introduction to Experimental Economics , 1992 .