Price rigidities and institutional variations in markets with posted prices (*)

Douglas Davis and Charles Holt

Economic Theory, 1996, vol. 9, issue 1, 63-80

Abstract: Standard laboratory posted-offer markets respond slowly and incompletely to demand shocks. In these one-sided markets, where sellers control the setting of prices, very little information is transmitted via the process of exchange. For this reason, traders have trouble distinguishing randomness in their own experience from changes in market fundamentals. This paper reports the results of twelve laboratory markets conducted to assess whether some common variants to standard posted-offer rules can correct the adjustment deficiences. Although discounting, multiple postings and excess demand information all improve performance, we find that response remains poor, and efficiencies low.

JEL-codes: C9 L1 (search for similar items in EconPapers)
Date: 1996
Note: Received: December 5, 1994; revised version August 8, 1995
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