Supply and Demand Risks in Laboratory Forward and Spot Markets: Implications for Agriculture

Dale J. Menkhaus, Chris T. Bastian, Owen R. Phillips and Patrick D. O'Neill

Journal of Agricultural and Applied Economics, 2000, vol. 32, issue 1, 159-173

Abstract: Laboratory experimental methods are used to investigate the impacts of supply and/or demand risks on prices, quantities traded, and earnings within forward and spot market institutions. Random demand and/or supply shifts can be as much as 25 percent of the expected equilibrium outcome. Nevertheless, results suggest that the spot or forward trading institution itself has a greater influence on market outcomes than the presence of risk within the trading institution. Sellers tend to have relatively higher earnings in a spot market than buyers, regardless of the risk. Total surplus, however, generally is greater in a forward market.

Date: 2000
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