Trading in Networks: A Normal Form Game Experiment
American Economic Journal: Microeconomics
vol. 1,
no. 2, August 2009
(pp. 114-32)
Abstract
This paper reports an experimental study of trading networks. Networks are incomplete in the sense that each trader can only exchange assets with a limited number of other traders. The greater the incompleteness of the network, the more intermediation is required to transfer the assets between initial and final owners. The uncertainty of trade in networks constitutes a potentially important market friction. Nevertheless, we find the pricing behavior observed in the laboratory converges to competitive equilibrium behavior in a variety of treatments. However, the rate of convergence varies depending on the network, pricing rule, and payoff function. (JEL C91, C92, G10, G19)Citation
Gale, Douglas M., and Shachar Kariv. 2009. "Trading in Networks: A Normal Form Game Experiment." American Economic Journal: Microeconomics, 1 (2): 114-32. DOI: 10.1257/mic.1.2.114Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- C92 Design of Experiments: Laboratory, Group Behavior
- G10 General Financial Markets: General (includes Measurement and Data)
- G19 General Financial Markets: Other
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