CaltechAUTHORS
  A Caltech Library Service

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. (1999) On the Behavioral Foundations of the Law of Supply and Demand: Human Convergence and Robot Randomness. Social Science Working Paper, 1079. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20171106-145242357

[img] PDF (sswp 1079 - Dec. 1999) - Submitted Version
See Usage Policy.

273Kb

Use this Persistent URL to link to this item: https://resolver.caltech.edu/CaltechAUTHORS:20171106-145242357

Abstract

In a seminal series of papers, Gode and Sunder [1993, b, 1996] have explored the relationship between limited rationality, market institutions and the general equilibration of markets to the competitive equilibrium. Their fundamental discovery is that within the classical double auction market institution only the weakest elements of rationality need to be present for markets to exhibit high allocative efficiency and price convergence. While Gode and Sunder place more emphasis on allocative efficiency than on price convergence, the apparent price convergence increases the agreement between their simulation results and observed price convergence in single isolated periods of double auction markets with humans. Their ‘Zero Intelligence’ [ZI] agents, are governed by completely random choice and constrained only by a budget constraint, are coordinated by market forces to the competitive equilibrium. The results are closely related to the results by Becker [1962] that the budget constraint alone, in the presence of randomly behaving agents, assures that demand curves will be downward sloping.


Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription
http://resolver.caltech.edu/CaltechAUTHORS:20140220-143226413Related ItemPublished Version
Additional Information: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. Published as 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.
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
Series Name:Social Science Working Paper
Issue or Number:1079
Record Number:CaltechAUTHORS:20171106-145242357
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20171106-145242357
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83001
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:06 Nov 2017 23:08
Last Modified:03 Oct 2019 19:01

Repository Staff Only: item control page