Trading in a Pure Exchange Economy without an Auctioneer: An Experimental Approach

This paper explores alternatives to the vVa1rasian Auctioneer for the allocation of resources in a pure exchange economy lacking a bilateral coincidence of wants. We have created three different computerized trading processes called BARTER, NUMERAIRE, and CARE (acronym for Computer Assisted Resource Exchange). CARE is a "smart market" in the sense that it contains computer algorithms that assist users in finding a coincidence of wants. The experimental results show that CARE outperforms BARTER and NUMERAIRE by extracting most of the gains from exchange with fewer contracts, lower volume, smaller utility swings, and lower variances in final utility positions.