Crockett, Sean and Oprea, Ryan and Plott, Charles R. (2010) Extreme Walrasian Dynamics: The Gale Example in the Lab. Social Science Working Paper, 1329. California Institute of Technology , Pasadena, CA. http://resolver.caltech.edu/CaltechAUTHORS:20100928-153906850
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We study the classic Gale (1963) economy using laboratory markets. Tatonnement theory predicts prices will diverge from an equitable interior equilibrium towards infinity or zero depending only on initial prices. The inequitable equilibria determined by these dynamics give all gains from exchange to one side of the market. Our results show surprisingly strong support for these predictions. In most sessions one side of the market eventually outgains the other by more than twenty times, leaving the disadvantaged side to trade for mere pennies. We also find preliminary evidence that these dynamics are sticky, resisting exogenous interventions designed to reverse their trajectories.
|Item Type:||Report or Paper (Working Paper)|
|Additional Information:||If you are unable to obtain a copy on the web or library contact the Working Paper Coordinator (firstname.lastname@example.org) and we will send you a copy.|
|Group:||Social Science Working Papers|
|Subject Keywords:||Tatonnement, Disequilibrium, General Equilibrium, Experiment|
|Classification Code:||JEL codes: C92, D50|
|Usage Policy:||No commercial reproduction, distribution, display or performance rights in this work are provided.|
|Deposited By:||Victoria Mason|
|Deposited On:||29 Sep 2010 18:47|
|Last Modified:||26 Dec 2012 12:28|
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