Marshallian vs. Walrasian Stability in an Experimental Market

Abstract

The experiments discussed below are an attempt to examine concepts of stability as found in economic textbooks. Two concepts of stability, which stem from two different concepts of market adjustment, seem to have dominated thinking. Whilst these two concepts are typically called Walras stability and Marshall stability, some controversy exists over the extent to which these two models represent their respective thinking. No doubt the current formal statements of the theories reflect an evolution of the ideas through the work of many theorists. The terminology is retained for convenience. Regardless of their origins, these two concepts lead to competing hypotheses about the conditions under which market instability will be observed so the subject is a natural one for experimental investigation. Furthermore, since this is the first experimental examination of the stability of equilibria, the strategy is to inquire about stability in the context of these two classical models and to avoid the temptation to attempt to extend them or integrate them with more modern theory. The old models have not been checked. They seem to be an appropriate place to start.