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A Note on 'Experimental Auction Markets and the Walrasian Hypothesis'

Nelson, Forrest D. (1980) A Note on 'Experimental Auction Markets and the Walrasian Hypothesis'. Social Science Working Paper, 307. California Institute of Technology , Pasadena, CA. (Unpublished)

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This note serves to correct an erroneous inference regarding price dynamics and to graphically illustrate the importance of model specification in the context of a very simple and fascinating structure. In an earlier JPE article, Vernon Smith concluded that excess supply by itself was an unreliable predictor of the speed of price adjustment. On the basis of regression procedures applied to experimental data he found that the potential rent to be captured exerts the dominant influence. Two alternative statistical procedures, a Tobit specification and a nonparametric test, dramatically deny this inference. Excess supply dominates excess rent as a predictor of the rate of adjustment, but in fact neither Hypothesis adequately captures the random behavior of price movement.

Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription (Smith, V. L., "Experimental Auction Markets and the Walrasian Hypothesis," Journal of Political Economy, Vol. 73(August 1965): 387-393.)
Additional Information:Vernon Smith suggested the possible application of limited dependent variable techniques and Charles Plott provided helpful discussion and encouragement. Viewpoints expressed and responsibility for errors or omission or commission are those of the author.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:307
Record Number:CaltechAUTHORS:20171012-163951246
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82333
Deposited By: Jacquelyn Bussone
Deposited On:16 Oct 2017 17:40
Last Modified:03 Oct 2019 18:53

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