An Experimental Examination of the Walrasian tâtonnement Mechanism

This is a systematic experimental comparison of the efficiency and competitive properties of a computerized multiunit tâtonnement with or without a dynamic improvement rule, with or without publicity of order flow information. All versions of the tâtonnement are comparatively less efficient than the continuous double auction. The tâtonnement yields competitive prices, but both sides tend to underreveal demand/supply, causing inefficiency. Only the full-information, no-improvement-rule version of the tâtonnement procedure approaches the efficiency of the double auction.