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Crockett, Sean,
Ryan Oprea, and
Charles Plott. 2011. "Extreme Walrasian Dynamics: The Gale Example in the Lab."
,
101(7): 3196-3220.
Show Article Details
DOI: 10.1257/aer.101.7.3196
Abstract:We study David Gale's (1963) economy using laboratory markets.
Tatonnement theory predicts prices will diverge from an equitable
interior equilibrium toward infinity or zero depending only on initial
prices. The inequitable equilibria determined by these dynamics give
all gains from exchange to one side of the market. We show surprisingly
strong support for these predictions. In most sessions one side
of the market eventually outgains the other by more than 20 times,
leaving the disadvantaged side to trade for mere pennies. We also
find preliminary evidence that these dynamics are sticky, resisting
exogenous interventions designed to reverse their trajectories. (JEL
C92, D50)
Additional links:
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Online Appendix
Authors:
Crockett, Sean (Baruch College (CUNY))
Oprea, Ryan (University of California-Santa Cruz)
Plott, Charles (California Institute of Technology)
JEL Classifications:
C92: Design of Experiments: Laboratory, Group Behavior
D50: General Equilibrium and Disequilibrium: General
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