Global instability in experimental general equilibrium: the Scarf example

Creators: Anderson, Christopher M.; Plott, Charles R.; Shimomura, Ken-Ichi; Granat, Sander

Abstract

Scarf (Int. Econ. Rev. 1 (1960) 157) proposed a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around, rather than converges to, the competitive equilibrium. Hirota (Int. Econ. Rev. 22 (1981) 461) characterized the price paths. We explore the predictions of Scarf's model in a non-tatonnement experimental double auction. The average transaction prices in each period do follow the path predicted by the Scarf and Hirota models. When the model predicts convergence the data converge; when the model predicts orbits, the data orbit in the direction predicted by the model. Moreover, we observe a weak tendency for prices within a period to follow the path predicted by the model.

Additional Information

© 2003 Elsevier Inc. Received 25 October 2002; final version received 13 March 2003. The financial support of the National Science Foundation and the Caltech Laboratory for Experimental Economics and Political Science is gratefully acknowledged. Funding support for Shimomura was provided by the Kyoto Center for the Study of Complex Economic Systems supported by Japan MEXT and the Japanese Bankers Association Foundation. Mason Porter and Daniel Song contributed to the early stages of the research. Helpful comments were received from Mahmoud El-Gamal, David Grether, Masayoshi Hirota, Anjan Mukherji, Daniel Rowe and Herbert Scarf.

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Global instability in experimental general equilibrium: the Scarf example

Abstract

Additional Information

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