The efficiency of the price system: evidence from an alternative market

Nan-Ting Chou, Ramon Degennaro and Raymond Sauer

Applied Economics Letters, 2000, vol. 7, issue 11, 703-706

Abstract: Most economists take it for granted that a price mechanism is usually the most effective means of resource allocation. This paper compares two methods of allocating resources in the thoroughbred racing market: a price mechanism and bureaucratic restrictions. It is shown that a simple price mechanism does a superior job of allocating racing ability than a myriad of conditions and restrictions set by even a highly informed expert.

Date: 2000
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DOI: 10.1080/135048500421304

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