Testing neoclassical competitive market theory in the field

John List

Artefactual Field Experiments from The Field Experiments Website

Abstract: Walrasian tatonnement has been a fundamental assumption in economics ever since Walras' general equilibrium theory was introduced in 1874. Nearly a century after its introduction, Vernon Smith relaxed the Walrasian tatonnement assumption by showing that neoclassical competitive market theory explains the equilibrating forces in ""double- auction"" markets. I make a next step in this evolution by exploring the predictive power of neoclassical theory in decentralized naturally occurring markets. Using data gathered from two distinct markets--the sports card and collector pin markets--I find a tendency for exchange prices to approach the neoclassical competitive model prediction after a few market periods.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:feb:artefa:00082

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