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THE HAYEK HYPOTHESIS IN EXPERIMENTAL AUCTIONS: INSTITUTIONAL EFFECTS AND MARKET POWER
Author(s) -
Davis Douglas D.,
Williams Arlington W.
Publication year - 1991
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1991.tb01270.x
Subject(s) - market power , economics , common value auction , microeconomics , profit (economics) , supply and demand , perfect competition , industrial organization , monetary economics , monopoly
We report twelve market experiments utilizing a “seller market power” supply and demand structure where two of five sellers can unilaterally increase their profit by withholding supply. The data indicate that both the double auction and posted offer institutions result in traders extracting the bulk of the potential gains from exchange in the market; however, prices generally occur above the competitive equilibrium prediction. Market power in the form of strategic supply withholding does not appear to be responsible for the supra‐competitive prices.