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Measuring Allocative Efficiency in Experimental Markets: An Alterntive Approach
Author(s) -
Rhodus W. Timothy,
Henderson Dennis R.
Publication year - 1988
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/10.2.273
Subject(s) - allocative efficiency , economics , measure (data warehouse) , microeconomics , value (mathematics) , econometrics , economic efficiency , redistribution (election) , mathematics , computer science , statistics , database , politics , political science , law
An alternative approach to measuring allocative efficiency within experimental markets is proposed. This approach incorporates the traditional efficiency measure, the deadweight loss of economic surplus, and an additional measure that captures income (value) redistribution between buyers and sellers resulting from individual transactions at prices that deviate from equilibrium. An extension is made to construct an additional measure to further discriminate between markets that appear similar in terms of pricing efficiency, which reflects the rate at which prices converge toward equilibrium. Previous conclusions regarding the relative pricing efficiency of different experimental markets need to be reexamined using the more comprehensive measures.