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Published June 1995 | Published
Journal Article Open

An Experimental Investigation of the Patterns of International Trade

Abstract

This paper studies a laboratory economy with some of the prominent features of an international economic system. The patterns of trade and output predicted by the law of comparative advantage are observed evolving within the experimental markets. Market prices and quantities move in the direction of the competitive equilibrium, but the quantitative predictions of the (risk neutral) competitive equilibrium are rejected. Considerable amounts of economic activity occur as disequilibria. Factor-price equalization is observed, but there is a universal tendency for factors of production to trade at prices below their marginal products.

Additional Information

© 1995 American Economic Association. We acknowledge the financial support of the National Science Foundation and the Caltech Laboratory for Experimental Economics and Political Science. The comments of Charles Holt have been useful. The comments of Mahmoud El-Gamal were especially helpful and resulted in the econometric model used extensively in the paper.

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