The Walrasian Tâtonnement Mechanism and Information

Patrick Joyce

RAND Journal of Economics, 1984, vol. 15, issue 3, 416-425

Abstract: This article reports the results of experiments analyzing the Walrasian tâtonnement mechanism. The tâtonnement mechanism has the following characteristics: there is only one price at any time; there is an information mechanism notifying all traders of the price; there is a mechanism for determining quantities offered for sale and purchase at the price; and transactions at nonequilibrating prices are forbidden. In addition, the Walrasian pricing rule is utilized by the auctioneer: the change in price has the same sign as excess demand. The treatment variable used in the experimental design is the degree of segregation of buyers and sellers. Complete segregation means sellers cannot discover the number of buyers and buyers cannot discover the number of sellers at an announced price. The results show that the auction mechanism is stable: it exhibits strong convergence properties and efficiency levels averaging better than 97%. Segregation of the buyers from the sellers leads to a significant difference in underrevelation of demand relative to supply.

Date: 1984
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