Bidding and Auctioning Institutions: Experimental Results

Abstract

Among the laboratory experimental studies of market price behavior there are numerous experiments designed on the basis of various bidding and auctioning processes of allocation. The theme of this conference will serve as the organizing principle of this paper which presents a summary of several published and previously unpublished experiments in auction and sealed-bid market behavior. VALUES, INSTITUTIONS AND MARKET STRUCTURE AS TREATMENT VARIABLES In discussing the use of experimental methods to determine the equilibrium and dynamic properties of market price behavior it is helpful to distinguish three classes of experimental market “treatment” variables: A. Individual values and their aggregation to form market values . In isolated single-commodity market experiments such values are defined as the individual supply and demand schedules, or simply the aggregate supply and demand conditions that bound price-quantity behavior. B. The institution of contract . This is defined as the entire set of rules and procedures of an experiment which taken together specify the process whereby individual subjects communicate, exchange information, and form binding contracts. C. Market structure . This is defined by the number of participants (buyers and sellers) and their relative “power” in the sense of relative demand or supply (cost) capacity. A complete set of market experiments can be viewed as providing observations on the mapping from values (supply and demand), institutions and market structure into price-quantity outcomes (price levels, price trajectories, quantities exchanged).

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