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1 - An Experimental Study of Competitive Market Behavior

Published online by Cambridge University Press:  06 July 2010

Vernon L. Smith
Affiliation:
University of Arizona
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Summary

INTRODUCTION

RECENT years have witnessed a growing interest in experimental L. games such as management decision- making games and games designed to simulate oligopolistic market phenomena. This article reports on a series of experimental games designed to study some of the hypotheses of neoclassical competitive market theory. Since the organized stock, bond, and commodity exchanges would seem to have the best chance of fulfilling the conditions of an operational theory of supply and demand, most of these experiments have been designed to simulate, on a modest scale, the multilateral auction-trading process characteristic of these organized markets. I would emphasize, however, that they are intended as simulations of certain key features of the organized markets and of competitive markets generally, rather than as direct, exhaustive simulations of any particular organized exchange. The experimental conditions of supply and demand in force in these markets are modeled closely upon the supply and demand curves generated by the limit price orders in the hands of stock and commodity market brokers at the opening of a trading day in any one stock or commodity, though I would consider them to be good general models of received short-run supply and demand theory. A similar experimental supply and demand model was first used by E. H. Chamberlin in an interesting set of experiments that pre-date contemporary interest in experimental games.

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Publisher: Cambridge University Press
Print publication year: 1991

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