Learning competitive equilibrium in laboratory exchange economies

Abstract

A laboratory market for two goods is instituted to examine the hypothesis that individuals will eventually coordinate on the induced competitive equilibrium. The mechanism for exchange strongly restricts the space of agent actions, facilitating the identification of decision rules. Evidence for learning competitive equilibrium is mixed due to strong heterogeneity in decision making. Some subjects forego immediately available gains when they expect the market to move in a more favorable direction, a condition necessary for coordinating on the competitive outcome. However, a majority do not, and many are content to satisfice, though the means to do better was reasonably transparent.

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