Testing neoclassical competitive market theory in the field.

Full Abstract

This study presents results from a pilot field experiment that tests predictions of competitive market theory. A major advantage of this particular field experimental design is that my laboratory is the marketplace:
subjects are engaged in buying, selling, and trading activities whether I run an exchange experiment or am a passive observer. In this sense, I am gathering data in a natural environment while still maintaining the necessary control to execute a clean comparison between treatments. The main results of the study fall into two categories. First, the competitive model predicts reasonably well in some market treatments:
the expected price and quantity levels are approximated in many market rounds. Second, the data suggest that market composition is important:
buyer and seller experience levels impact not only the distribution of rents but also the overall level of rents captured. An unexpected result in this regard is that average market efficiency is lowest in markets that match experienced buyers and experienced sellers and highest when experienced buyers engage in bargaining with inexperienced sellers. Together, these results suggest that both market experience and market composition play an important role in the equilibrium discovery process.

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Author information

Author/s: List, John A (JA);

Affiliation: Agricultural and Resource Economics, University of Maryland, 2200 Symons Hall, College Park 20742-5535, USA. jlist(-atsign-)arec.umd.edu

Journal and publication information

Publication Type: Comparative Study; Evaluation Studies; Journal Article

Journal: Proceedings of the National Academy of Sciences of the United States of America (Proc Natl Acad Sci U S A), published in United States. (Language: eng)

Reference: 2002-Nov; vol 99 (issue 24) : pp 15827-30

Dates: Created 2002/11/27; Completed 2003/01/14; Revised 2008/11/20;

PMID: 12432103, status: MEDLINE (last retrieval date: 12/26/2008)

Sourced from the National Library of Medicine. Abstract text and other information may be subject to copyright.

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