Concurrent Trading in Two Experimental Markets with Demand Interdependence

We report results from fifteen computerized double auctions with concurrent trading of two commodities. In contrast to prior experimental markets, buyers' demands are induced via CES earnings functions defined over the two traded goods, with a fiat money expenditure constraint. Sellers receive...

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Bibliographic Details
Published in:Economic theory 2000-11, Vol.16 (3), p.511-528
Main Authors: Williams, Arlington W., Smith, Vernon L., Ledyard, John O., Gjerstad, Steven
Format: Article
Language:English
Subjects:
Auction markets
Auctions
Commodities
Commodity prices
Competitive equilibrium
Endowments
Experimental economics
General economic equilibrium
Interdependence
Marginal costs
Market demand
Market equilibrium prices
Market prices
Opportunity costs
Pricing
Utility theory
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Summary:We report results from fifteen computerized double auctions with concurrent trading of two commodities. In contrast to prior experimental markets, buyers' demands are induced via CES earnings functions defined over the two traded goods, with a fiat money expenditure constraint. Sellers receive independent marginal cost arrays for each commodity. Parameters for buyers' earnings functions and sellers' costs are set to yield a stable, competitive equilibrium. In spite of the complexity introduced by the demand interdependence, the competitive model is a good predictor of market outcomes, although prices tend to be above (below) the competitive prediction in the low-price (high-price) market.
ISSN:0938-2259
1432-0479
DOI:10.1007/PL00020941