Three Minimal Market Institutions with Human and Algorithmic Agents: Theory and Experimental Evidence
Juergen Huber,
Martin Shubik and
Shyam Sunder
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Juergen Huber: University of Innsbruck
No 1623, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University
Abstract:
We define and examine the performance of three minimal strategic market games (sell-all, buy-sell, and double auction) in laboratory relative to the predictions of theory. Unlike open or partial equilibrium settings of most other experiments, these closed exchange economies have limited amounts of cash to facilitate transactions, and include feedback. General equilibrium theory, since it abstracts away from market mechanisms and has no role for money or credit, makes no predictions about how the paths of convergence to the competitive equilibrium may differ across alternative mechanisms. Introduction of markets and money as carriers of process creates the possibility of motion. The laboratory data reveal different paths, and different levels of allocative efficiency in the three settings. The results suggest that abstracting away from all institutional details does not help understand dynamic aspects of market behavior. For example, the oligopoly effect of feedback from buying an endowed good is missed. Inclusion of mechanism differences into theory may enhance our understanding of important aspects of markets and money and help link conventional equilibrium analysis with dynamics.
Keywords: Strategic market games; Laboratory experiments; Minimally intelligent agents; Adaptive learning agents; General equilibrium (search for similar items in EconPapers)
JEL-codes: C92 D43 D51 D58 L13 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2007-08, Revised 2009-06
New Economics Papers: this item is included in nep-exp and nep-gth
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Citations: View citations in EconPapers (2)
Published in Games and Economic Behavior (2010), 70: 403-424
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Journal Article: Three minimal market institutions with human and algorithmic agents: Theory and experimental evidence (2010) 
Working Paper: Three Minimal Market Institutions with Human and Algorithmic Agents: Theory and Experimental Evidence (2010) 
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