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On the Behavioral Foundations of the Law of Supply and Demand: Human Convergence and Robot Randomness

Brewer, Paul J. and Huang, Maria and Nelson, Brad and Plott, Charles R. (2002) On the Behavioral Foundations of the Law of Supply and Demand: Human Convergence and Robot Randomness. Experimental Economics, 5 (3). pp. 179-208. ISSN 1386-4157. https://resolver.caltech.edu/CaltechAUTHORS:20140220-143226413

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Abstract

This research builds on the work of D.K. Gode and Shyam Sunder who demonstrated the existence of a strong relationship between market institutions and the ability of markets to seek equilibrium - even when the agents themselves have limited intelligence and behave with substantial randomness. The question posed is whether or not market institutions account for the operation of the law of supply and demand in markets population by humans and no role required of human rationality. Are institutions responsible for the operations of the law of supply and demand or are behavioral principles also at work? Experiments with humans and simulations with robots both conducted in conditions in which major institutional and structural aids to convergence were removed, produced clear answers. Human markets converge, while robot markets do not. The structural and institutional features certainly facilitated convergence under conditions of substantial irrationality, but they are not necessary for convergence in markets in which agents have the rationality of humans.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1023/A:1020871917917DOIArticle
http://resolver.caltech.edu/CaltechAUTHORS:20171106-145242357Related ItemWorking Paper
Additional Information:© 2002 Economic Science Association. The financial support of the National Science Foundation, the Caltech Laboratory for Experimental Economics and Political Science, the Hong Kong SAR University Grants Committee and the HKUST Center for Experimental Business Research is gratefully acknowledged. We would like to thank Tim Cason, Leonard Cheng, S.H. Chew, Jim Cox, John Dickhaut, Dan Friedman, Steve Gjerstad, John Ledyard, Charles Noussair, Jason Shachat, and Shyam Sunder for their comments.
Group:Social Science Working Papers
Funders:
Funding AgencyGrant Number
NSFUNSPECIFIED
Caltech Laboratory for Experimental Economics and Political ScienceUNSPECIFIED
Hong Kong SAR University Grants CommitteeUNSPECIFIED
HKUST Center for Experimental Business ResearchUNSPECIFIED
Subject Keywords:experiments, rationality, equilibration, robots
Other Numbering System:
Other Numbering System NameOther Numbering System ID
Social Science Working Paper1079
Issue or Number:3
Classification Code:JEL: C9, D5
Record Number:CaltechAUTHORS:20140220-143226413
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20140220-143226413
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:43914
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:20 Feb 2014 23:08
Last Modified:03 Oct 2019 06:12

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