(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:79)(cid:82)(cid:68)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:21)(cid:19)(cid:27)(cid:17)(cid:20)(cid:27)(cid:23)(cid:17)(cid:20)(cid:22)(cid:23)(cid:17)(cid:20)(cid:25)(cid:25)(cid:3)(cid:82)(cid:81)(cid:3)(cid:54)(cid:88)(cid:81)(cid:15)(cid:3)(cid:21)(cid:22)(cid:3)(cid:48)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:19)(cid:28)(cid:29)(cid:19)(cid:27)(cid:29)(cid:21)(cid:28)(cid:3)(cid:36)(cid:48)
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0001
`
`IBG 1034
`CBM of U.S. Patent No. 7,212,999
`
`

`
`112
`
`\.’l_-IRN(Jl\.‘ L. SMl‘l‘1l
`
`C‘hamberlin’s paper was highly sugges-
`tive in demonstrating the potentialities
`of experimental techniques in the study
`of applied market theory.
`Parts II and III of
`this paper are
`devoted to a descriptive discussion of the
`experiments and some of their detailed
`results. Parts IV and V present an em-
`pirical analysis of various equilibrating
`hypotheses and a rationalization of the
`hypothesis found to be most successful
`in these experiments.
`Part VI provides a brief summary
`which the reader may wish to consult
`before reading the main body of the paper.
`
`II . EXPERIMENTAL PROCEDURE
`
`The experiments discussed in Parts
`III and IV have followed the same gen-
`eral design pattern. The group of subjects
`is divided at random into two subgroups,
`a group of buyers and a group of sellers.
`Each buyer receives a card containing
`a number, known only to that buyer,
`which represents the maximum price he
`is willing to pay for one unit of
`the
`fictitious commodity. It is explained that
`the buyers are not to buy a unit of the
`commodity at a price exceeding that
`appearing on their buyer’s card; they
`would be quite happy to purchase a
`unit at any price below this number-—the
`lower the better; but,
`they would be
`entirely willing to pay just
`this price
`for the commodity rather than have their
`wants go unsatisfied. It is further ex-
`plained that each buyer should think
`of himself as making a pure profit equal
`to the difference between his actual con-
`
`tract price and the maximum reserva-
`tion price on his card. These reservation
`prices generate a demand curve such
`as D1) in the diagram on the left
`in
`Chart 1. At each price the correspond-
`ing quantity represents the maximum
`amount that could be purchased at that
`
`price. Thus, in Chart 1, the highest price
`buyer is Willing to pay as much as $3.25
`for one unit. At a price above $3.25
`the demand quantity is zero, and at
`$3.25 it cannot exceed one unit. The
`
`next highest price buyer is willing to
`pay $3.00. Thus, at $3.00 the demand
`quantity cannot exceed two units. The
`phrase “cannot exceed” rather than “is”
`will be seen to be of no small
`impor-
`tance. How much is actually taken at
`any price depends upon such important
`things as how the market is organized,
`and various mechanical and bargaining
`considerations associated with the diet-
`
`acceptance process. The demand curve,
`therefore, defines the set (all points on
`or to the left of DD) of possible demand
`quantities at each, strictly hypothetical,
`ruling price.
`Each seller receives a card containing
`a number, known only to that seller,
`which represents the minimum price at
`which he is willing to relinquish one unit
`of the commodity. It is explained that
`the sellers should be willing to sell at
`their minimum supply price rather than
`fail
`to make a sale, but they make a
`pure profit determined by the excess
`of their contract price over their mini-
`mum reservation price. Under no con-
`dition should they sell below this mini-
`mum. These minimum seller prices gen-
`erate a supply curve such as S5 in Chart
`1. At each hypothetical price the cor-
`responding quantity represents the maxi-
`mum amount that could be sold at that
`
`price. The supply curve, therefore, de-
`fines the set of possible supply quantities
`at each hypothetical ruling price.
`In experiments 1-8 each buyer and
`seller is allowed to make a contract for
`
`the exchange of only a single unit of
`the commodity during any one trading
`or market period. This rule was for the
`sake of simplicity and was relaxed in
`
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`All use subject to JSTOR Tenns and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0002
`0002
`
`

`
`EXPERIMENTAL STUDY OF COMPETITIVE MARKET BEHAVIOR
`
`113
`
`has been closed, and the buyer and seller
`subsequent experiments.
`Each experiment was conducted over
`making the deal drop out of the market
`a sequence of trading periods five to
`in the sense of no longer being permitted
`to make bids, ofiers, or contracts for the
`ten minutes long depending upon the
`remainder of that market period.“ As
`number of participants in the test group.
`Since the experiments were conducted
`soon as a bid or ofier is accepted, the
`Within a class period,
`the number of
`contract price is recorded together with
`the minimum supply price of the seller
`trading periods was not uniform among
`CH.—’l]-{'1' 1
`
`TEST 1
`
`r°=s2.oo. 10:6
`
`$-LEI0
`‘- 3.30
`" 3.60
`- 3.40
`— 3.20
`— 3.00
`‘ 2.80
`— 2.uD
`- 2.40
`2.? 0
`
`14.00 -
`no
`no
`
`3.40
`
`am:
`
`'
`
`I
`
`_
`
`2.59
`1&0 Z
`no I
`120
`-
`FRJCI 1.30
`Lou
`1.60
`ran
`Lzo "
`Loo
`so
`no
`.40
`JD
`
`I
`
`'
`
`"I"
`
`_'
`
`-p———___._._____._.__
`
`'
`
`'
`
`PERIOD 1
`FEIIODl
`|‘EIIO0 5 __
`PERIOD 4
`Pi IIOD 3
`li|l|l|'l|'J_i_l_.|:'Li._.|li
`'—|—L—-l
`‘J133-I51134$|23l51’23-I5o‘.'I23456
`‘l9.aNSA(_f|o.-.1NUMIERIMPERIODJ
`
`.»:.a .10
`
`PRICE
`
`mo
`|.8-3
`Len
`L40
`1.20
`1.00
`.80
`
`.20
`
`the various experiments. In the typical
`experiment, the market opens for trad-
`ing period 1. This means that any buyer
`(or seller) is free at any time to raise
`his hand and make a verbal offer to
`
`buy (or sell) at any price which does
`not violate his maximum (or minimum)
`reservation price. Thus, in Chart 1, the
`buyer holding the $2 .50 card might raise
`his hand and shout, “Buy at $1.00.”
`The seller with the $1.50 card might
`then shout, “Sell at $3.60.” Any seller
`(or buyer) is free to accept a bid (or
`offer), in which case a binding contract
`
`and the maximum demand price of the
`buyer involved in the transaction. These
`observations represent the recorded data
`of the experiment.‘ Within the time limit
`‘ All purchases are for final consumption. There
`are no speculative purchases for resale in the same
`or later periods. There is nothing, however, to pre-
`vent one from designing an experiment in which
`purchases for resale are permitted if the objective
`is to study the role of speculation in the equilibrating
`process. One could, for example, permit the carry-
`over of stocks from one period to the next.
`‘ Owing to limitations of manpower and equip-
`ment
`in experiments 1-8, bids and ofiers which
`did not lead to transactions could not be recorded.
`In subsequent experiments a tape recorder was used
`for this purpose.
`
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`All use subject to JSTOR Terms and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0003
`0003
`
`

`
`114
`
`l."l'*lR1'\-‘UN L. SMITH
`
`this procedure is
`of a trading period,
`continued until bids and offers are no
`
`longer leading to contracts. One or two
`calls are made for final bids or offers
`
`and the market is officially closed. This
`ends period 1. The market is then im-
`mediately reopened for the second “day”
`of trading. All buyers,
`including those
`who did and those who did not make
`
`contracts in the preceding trading period,
`now (as explained previously to the sub-
`jects) have a renewed urge to buy one
`unit of the commodity. For each buyer,
`the same maximum buying price holds
`in the second period as prevailed in the
`first period. In this way the experimental
`demand curve represents a demand per
`unit time or per trading period. Similarly,
`each seller, we may imagine, has “over-
`night” acquired a fresh unit of the com-
`modity which he desires to sell in period
`2 under the same minimum price con-
`ditions as prevailed in period 1. The
`experimental supply curve thereby repre-
`sents a willingness to supply per unit
`time. Trading period 2 is allowed to run
`its course, and then period 3, and so on.
`By this means we construct a prototype
`market
`in which there is a flow of a
`
`the market.
`commodity onto and off
`The stage is thereby set to study price
`behavior under given conditions of nor-
`mal supply and demand?’ Some buyers
`and sellers, it should be noted, may be
`unable to make contracts in any trading
`period, or perhaps only in certain peri-
`ods.
`Insofar as these traders are sub-
`
`marginal buyers or sellers, this is to be
`expected.
`Indeed,
`the ability of these
`experimental markets to ration out sub-
`marginal buyers and sellers will be one
`measure of the effectiveness or competi-
`tive performance of the market.
`The above design considerations define
`a rejection set of offers (and bids) for
`each buyer (and seller), which in turn
`
`defines a demand and a supply schedule
`for the market in question. These sched-
`ules do nothing beyond setting extreme
`limits to the observable price-quantity
`behavior in that market. All we can say
`is that the area above the supply curve
`is a region in which sales are feasible,
`while the area below the demand curve
`
`is a region in which purchases are feasi-
`ble. Competitive price theory asserts that
`there will be a tendency for price-quan-
`tity equilibrium to occur at the extreme
`quantity point of the intersection of these
`two areas. For example, in Chart 1 the
`shaded triangular area APB represents
`the intersection of these feasible sales
`
`and purchase sets, with P the extreme
`point of this set. We have no guarantee
`that the equilibrium defined by the inter-
`section of these sets will prevail, even
`approximately, in the experimental mar-
`ket (or any real counterpart of it). The
`mere fact that, by any definition, supply
`and demand schedules exist in the back-
`
`ground of a market does not guarantee
`that any meaningful relationship exists
`
`5 The design of my experiments diflcrs from that
`of Chamberlin (op. £371.) in several ways. In Chamber-
`lin’s experiment the buyers and sellers simply cir-
`culate and engage in bilateral higgling and lnargaining
`until they make a contract or the trading period
`ends. As contracts are made the transaction price
`is recorded on the blackboard. Consequently, there
`is very little,
`if any, multilateral bidding. Each
`trader’s attention is directed to the one person with
`whom he is bargaining, whereas in my experiments
`each trader’s quotation is addressed to the entire
`trading group one quotation at a time. Also Cham-
`berlin’s experiment constitutes a pure exchange mar-
`ket operated for a single trading period. There
`is,
`therefore,
`less opportunity for traders to gain
`experience and to modify their subsequent behavior
`in the light of such experience. It is only through
`some learning mechanism of this kind that I can
`imagine the possibility of equilibrium being ap-
`proached in any real market. Finally, in the present
`experiments I have varied the design from one
`experiment to another in a conscious attempt to
`study the effect of ditiercnt conditions of supply
`and demand, changes in supply or demand, and
`changes in the rules of market organization on
`market-price behavior.
`
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`All use subject to JSTOR Tenns and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0004
`0004
`
`

`
`F.XPFlRlMI-I.\IT.‘\L STUDY 01-‘ C0lVIPl“.'1"ITlVl'1 .\1'.'\RKFZT B1'*‘.HAVTOR
`
`115
`
`between those schedules and what is ob-
`
`observe the offers and bids that are ten-
`
`served in the market they are presumed
`to represent. All the supply and demand
`schedules can do is set broad limits on
`
`in
`the behavior of the market.“ Thus,
`the symmetrical supply and demand dia-
`gram of Chart 1, it is conceivable that
`every buyer and seller could make a
`contract. The $53.25 buyer could buy
`lrom the $3.25 seller, the $3.00 buyer
`could buy from the $3.00 seller, and so
`forth, without violating any restrictions
`on the behavior of buyers and sellers.
`Indeed,
`if we separately paired buyers
`and sellers in this special way, each pair
`could be expected to make a bilateral
`contract at the seller’s minimum price
`which would be equal
`to the buyer’s
`maximum price.
`It should be noted that these experi-
`ments conform in several important ways
`to what we know must be true of many
`kinds of real markets. In a real competi-
`tive market such as a commodity or
`stock exchange, each marketer is likely
`to be ignorant of the reservation prices
`at which other buyers and sellers are
`willing to trade. Furthermore, the only
`way that a real marketer can obtain
`knowledge of market conditions is to
`“ In fact, these schedules are modified as trading
`takes place. Whenever at buyer and a seller make
`:1 contract and “drop out” of the market, the demand
`and supply schedules are shifted to the left
`in a
`manner tlE[)t.‘Iltlll']g upon the bu_ver’s and seller’s
`position on the schedules. Hence, the supply and
`demand iulictiolis continually alter as the trading
`process occurs. It isdidicult to imagine a real market
`process which does not exhibit this characteristic.
`This means that the inlra—trading—period schedules
`are not independent of the transactions taking place.
`However,
`the iriitial schedules prevailing at
`the
`opening of each trading period are independent
`of the transactions, and it is these schedules that
`I identify with the “theoretical conditions of supply
`and demand,” which the theorist detines independ-
`ently of actual market prices and quantities. One
`of the important obj:-.ctives in these experiments
`is to determine whether or not these initial schedules
`have any power to predict the observed behavior
`of the market.
`
`dered, and whether or not they are ac-
`cepted. These are the public data of the
`market. A marketer can only know his
`own attitude, and,
`from observation,
`learn something about the objective be-
`havior of others. This is a major feature
`of these experimental markets. We de-
`liberately avoid placing at the disposal
`of our subjects any information which
`would not be practically attainable in
`a real market. Each experimental market
`is forced to provide all of its own “his-
`tory.” These markets are also a replica
`of real markets in that they are com-
`posed of a practical number of market-
`ers, say twenty, thirty, or forty. We do
`not require an indefinitely large number
`of marketers, which is usually supposed
`necessary for
`the existence of “pure”
`competition.
`One important condition operating in
`our experimental markets is not likely
`to prevail in real markets. The experi-
`mental conditions of supply and demand
`are held constant over several successive
`
`trading periods in order to give any
`equilibrating mechanisms an opportuni-
`ty to establish an equilibrium over time.
`Real markets are likely to be continu-
`ally subjected to changing conditions of
`supply and demand. Marshall was well
`aware of such problems and defined equi-
`librium as a condition toward which the
`
`market would move if the forces of sup-
`ply and demand were to remain station-
`ary for a sufliciently long time. It is
`this concept of equilibrium that this par-
`ticular series of experiments is designed,
`in part,
`to test. There is nothing to
`prevent one from passing out new buyer
`and/or seller cards, representing changed
`demand and/or supply conditions, at the
`end of each trading period if the objective
`is to study the effect of such constantly
`changing conditions on market behavior.
`
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`(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:79)(cid:82)(cid:68)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:21)(cid:19)(cid:27)(cid:17)(cid:20)(cid:27)(cid:23)(cid:17)(cid:20)(cid:22)(cid:23)(cid:17)(cid:20)(cid:25)(cid:25)(cid:3)(cid:82)(cid:81)(cid:3)(cid:54)(cid:88)(cid:81)(cid:15)(cid:3)(cid:21)(cid:22)(cid:3)(cid:48)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:19)(cid:28)(cid:29)(cid:19)(cid:27)(cid:29)(cid:21)(cid:28)(cid:3)(cid:36)(cid:48)
`All use subject to JSTOR Terms and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0005
`0005
`
`

`
`116
`
`VERNON L. SMITH
`
`In three of the nine experiments, once-
`for-all changes in demand and/or supply
`were made for purposes of studying the
`transient dynamics of a market’s re-
`sponse to such stimuli.
`
`III. DESCRIPTION AND DISCUSSION
`OF EXPERIMENTAL RESULTS
`
`The supply and demand schedule for
`each experiment is shown in the diagram
`on the left of Charts 1—-10. The price
`and quantity at which these schedules
`intersect will be referred to as the pre-
`dicted or theoretical “equilibrium” price
`and quantity for the corresponding ex-
`perimental market,
`though such an
`equilibrium will not
`necessarily be
`attained or approached in the market.
`The performance of each experimental
`market
`is summarized in the diagram
`on the right of Charts I-10, and in
`Table 1. Each chart shows the sequence
`of contract or exchange prices in the
`order in which they occurred in each
`trading period. Thus,
`in Chart 1,
`the
`first
`transaction was effected at $1.70,
`the second at $1.80, and so on, with a
`total of five transactions occurring in
`trading period 1. These charts show con-
`tract price as a function of transaction
`number rather than calendar time, the
`
`latter of course being quite irrelevant
`to market dynamics.
`The most striking general characteris~
`tic of tests 1-3, 5-17, 9, and 10 is the
`remarkably strong tendency for exchange
`prices to approach the predicted equi-
`librium for each of these markets. As
`
`the exchange process is repeated through
`successive trading periods with the same
`conditions of supply and demand pre-
`vailing initially in each period, the varia-
`tion in exchange prices tends to decline,
`and to cluster more closely around the
`equilibrium. I_n Chart 1, for example, the
`variation in contract prices over the five
`
`trading periods is from $130 to $2.25.
`The maximum possible variation is from
`$0.75 to $3.25 as seen in the supply
`and demand schedules. As a means of
`
`measuring the convergence of exchange
`prices in each market, a “coellicient of
`convergence,” a, has been computed for
`each trading period in each market. The
`a for each trading period is the ratio
`of the standard deviation of exchange
`prices, org, to the predicted equilibrium
`price, Po,
`the ratio being expressed as
`a percentage. That
`is, u = 100 as/Po
`where an is the standard deviation of
`
`exchange prices around the equilibrium
`price rather than the mean exchange
`price. Hence,
`0. provides a measure of
`exchange price variation relative to the
`predicted equilibrium exchange price. As
`is seen in Table 1 and the charts for
`
`all tests except test 8, 0. tends to decline
`from one trading period to the next,
`with tests 2, 4A, 5, 6A, 7, 9A, and 10
`showing monotone convergence.
`Turning now to the individual experi-
`mental results, it will be observed that
`the equilibrium price and quantity are
`approximately the same for the supply
`and demand curves of tests 2 and 3.
`
`The significant difference in the design
`of these two tests is that
`the supply
`and demand schedules for
`test 2 are
`
`relatively flat, while the corresponding
`schedules for test 3 are much more steep-
`ly inclined.
`Under the Walrasian hypothesis (the
`rate of increase in exchange price is an
`increasing function of the excess demand
`at
`that price), one would expect
`the
`market in test 2 to converge more rapidly
`than that in test 3. As is evident from
`
`comparing the results in Charts 2 and
`3, test 2 shows a more rapid and less er-
`ratic tendency toward equilibrium. These
`results are, of course, consistent with
`many other hypotheses,
`including the
`
`This Content downloaded from 208.184.134.166 on Sun, 23 Mar 2014 09:08:29 AM
`(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:79)(cid:82)(cid:68)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:21)(cid:19)(cid:27)(cid:17)(cid:20)(cid:27)(cid:23)(cid:17)(cid:20)(cid:22)(cid:23)(cid:17)(cid:20)(cid:25)(cid:25)(cid:3)(cid:82)(cid:81)(cid:3)(cid:54)(cid:88)(cid:81)(cid:15)(cid:3)(cid:21)(cid:22)(cid:3)(cid:48)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:19)(cid:28)(cid:29)(cid:19)(cid:27)(cid:29)(cid:21)(cid:28)(cid:3)(cid:36)(cid:48)
`All use subject to JSTOR Terms and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0006
`0006
`
`

`
`TABLE} 1.
`
`'l'L:s't
`
`Pre-
`Lliclud Actual
`Predicted
`l~Jx—
`l'lx-
`"1'r;u1-
`[:I1a111.:L- change Exchange
`ing
`1’crio<1 Quan-
`Quan— Plicc (Pa)
`my
`lit};
`{In}
`(X)
`
`Average
`Actual
`1_".KC1|aI1j;I:
`Price
`(77)
`
`Cocf—
`ficient
`of Con-
`vcrguncu
`[:1 =
`(100 do}!
`U’n}]
`
`No. of Sub-
`No. of 5ub—
`marginal No. of Sub- marginal No. of Sub-
`Buyers
`marginal
`Sellers
`marginal
`Who
`Bllynrs
`W110
`Sellers
`Could
`Who Made
`Could
`Who Made
`Make
`Contmcis
`Make
`Contracts
`Contracts
`Conlracls
`
`6
`6
`6
`6
`6
`
`13
`15
`15
`
`16
`16
`10
`16
`
`5
`5
`5
`7
`6
`
`16
`15
`16
`
`1?
`15
`15
`15
`
`2.00
`2.00
`2.00
`2.00
`2.00
`
`3.425
`3.425
`3.425
`
`3.50
`3.50
`3.50
`3.50
`
`1
`2
`3
`4
`5
`
`[1
`2
`13
`
`1
`2
`3
`4
`
`.
`5
`
`1
`i
`1
`
`.
`'
`
`3 . .
`
`.
`
`.
`
`. ..
`
`4A
`
`'
`
`'
`
`'
`
`'
`
`1.80
`1.86
`2.02
`2.03
`2.03
`
`3.47
`3.43
`3.42
`
`3.49
`3.47
`3.56
`3.55
`
`3 . 53
`3 . 37
`3 .32
`3 .32
`
`11.8
`8.1.
`5.2
`5.5
`3.5
`
`9.9
`5.4
`2. 2
`
`16.5
`6.6
`3. 7
`5.7
`
`19 . 1
`10 . 4
`7. 8
`7 . 6
`
`5
`5
`5
`5
`5
`
`4
`4
`4
`
`5
`5
`5
`5
`
`0
`0
`0
`1
`0
`
`2
`2
`2
`
`1
`0
`0
`0
`
`5
`5
`5
`5
`5
`
`3
`3
`3
`
`0
`6
`6
`6
`
`0
`0
`0
`1
`0
`
`1
`1
`U
`
`2
`I
`0
`0
`
`None
`None
`None
`None
`
`None
`None
`None
`None
`
`None
`None
`None
`None
`
`None
`None
`None
`None
`
`1
`2
`3
`4
`
`1
`2
`3
`
`1
`{2
`3
`4
`
`'1
`2
`
`10
`10
`10
`10
`
`8
`8
`8
`
`10
`I0
`I0
`10
`
`12
`12
`
`9
`9
`9
`9
`
`8
`7
`6
`
`11
`9
`10
`9
`
`12
`12
`
`3. 10
`g . 10
`. 10
`3. 10
`
`3. 10
`3.10
`3. 10
`
`3.125
`3.125
`3.125
`3.125
`
`3.45
`3.45
`
`3 . 25
`3.30
`3 . 29
`
`3.12
`3.13
`3.11
`3.12
`
`3.68
`3.52
`
`6. 9
`7.1
`6.5
`
`2.0
`0.7
`0.7
`0.6
`
`9.4
`4.3
`
`413 .
`
`.
`
`.
`
`.
`
`.
`
`.
`
`SA
`
`SB
`
`'
`
`'
`
`‘
`
`' "
`
`6A
`
`‘
`
`‘
`
`’
`
`' "
`
`None
`None
`None
`
`None
`None
`None
`
`None
`None
`None
`
`None
`None
`None
`
`7
`7
`7
`7
`
`4
`4
`
`0
`1
`1
`0
`
`0
`0
`
`3
`3
`2
`0
`
`7
`7
`7
`7
`
`3
`3
`
`0
`0
`0
`0
`
`2
`0
`
`None
`None
`None
`None
`
`None
`None
`None
`None
`
`1
`2
`3
`4
`
`1
`2
`
`'1
`2
`
`3
`4
`5
`6
`
`12
`12
`12
`12
`
`12
`12
`
`9
`9
`
`9
`9
`9
`9
`
`12
`12
`12
`12
`
`11
`6
`
`8
`9
`
`9
`8
`9
`9
`
`10. 75
`10.75
`10. 75
`10. 75
`
`8.75
`8.75
`
`3.40
`3.40
`
`3.40
`3.40
`3 .40
`3.40
`
`5.29
`7.17
`9.06
`10.90
`
`53 .8
`38.7
`21.1
`9 .4
`
`9.14
`.
`. .
`.
`
`.
`
`.
`
`.
`
`.
`
`11.0
`. .
`.
`. .
`
`.
`
`.
`
`.
`
`2.12
`2.91
`
`3.23
`3.32
`3 .33
`3 .34
`
`49.1
`22.2
`
`7.1
`5.4
`3 .0
`2 .7
`
`5
`5
`5
`5
`
`4
`4
`
`3
`3
`
`3
`3
`3
`3
`
`GB
`
`"
`
`7
`
`'
`
`'
`
`' '
`
`' "
`
`SA
`
`.
`
`1
`1
`
`1
`0
`
`1
`0
`0
`0
`
`None
`None
`
`None
`None
`
`None
`None
`None
`None
`
`None
`None
`
`None
`None
`
`None
`None
`None
`None
`
`0
`0
`0
`0
`
`[1
`2
`3
`4
`
`1
`2
`
`1
`*2
`3
`
`1
`
`7
`7
`7
`7
`
`7
`7
`
`18
`18
`18
`
`20
`
`8
`5
`6
`5
`
`5
`6
`
`18
`18
`18
`
`20
`
`2.25
`2.25
`2.25
`2.25
`
`2.25
`2.25
`
`3.40
`3.40
`3.40
`
`3.30
`
`2.50
`2.20
`2.12
`2.12
`
`2.23
`2.29
`
`2.81
`2.97
`3.07
`
`3.52
`
`19.0
`2.9
`7.4
`7.0
`
`7.3
`6.1
`
`21.8
`15.4
`13.2
`
`10.3
`
`'
`
`'
`
`1
`
`33
`
`9.4....
`
`93..
`
`5
`5
`5
`5
`
`5
`5
`
`6
`6
`6
`
`4
`
`0
`0
`0
`0
`
`0
`0
`
`3
`2
`2
`
`3
`
`4
`4
`4
`4
`
`4
`4
`
`None
`None
`None
`
`0
`0
`
`None
`None
`None
`
`2
`
`(J
`
`10 . .
`
`. . .
`
`.
`
`None
`None
`2
`4
`11.0
`3.17
`3.40
`13
`13
`1
`None
`None
`1
`4
`3.2
`3.36
`3.40
`17
`18
`2
`None
`None
`0
`4
`2.2
`3.38
`3.40
`17
`18
`3
`
`
`'
`
`.
`
`This content downloaded from 208.184.134.166 on Sun, 23 Mar 2014 09:08:29 AM
`(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:79)(cid:82)(cid:68)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:21)(cid:19)(cid:27)(cid:17)(cid:20)(cid:27)(cid:23)(cid:17)(cid:20)(cid:22)(cid:23)(cid:17)(cid:20)(cid:25)(cid:25)(cid:3)(cid:82)(cid:81)(cid:3)(cid:54)(cid:88)(cid:81)(cid:15)(cid:3)(cid:21)(cid:22)(cid:3)(cid:48)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:19)(cid:28)(cid:29)(cid:19)(cid:27)(cid:29)(cid:21)(cid:28)(cid:3)(cid:36)(cid:48)
`All use subject to JSTOR Terms and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0007
`0007
`
`

`
` 2.00
`
`PERIOD I
`I
`3
`
`I
`:
`I
`:
`!_
`I
`I5
`-II
`I:
`3
`4
`16
`I2
`Tn.IN'a.l(T:oN Human rev PERiUD!
`
`I.
`5
`
`I
`I2
`
`Ia
`
`
`
`
`CHART 2
`
`TEST 2
`
`P9: $3.425.
`
`Ia--I3
`
`9
`‘I!
`QUKNTIYT
`
`I3
`
`I5
`
`:1
`
`I0
`
`I
`
`-1
`
`CHART 3
`
`TEST 3
`
`99: 53.45, 3|n=l§
`
`{I090
`0.50
`9.00
`0.60
`B 00
`150
`I00
`5&0
`6.00
`5.50
`
`4.50
`4.0:-
`3.5:!
`3.00
`2.50
`1 oo
`1.50
`1.00
`50
`
`PRICE
`
`3 10.00
`0.50
`9.00
`0.50
`8.00
`7.50
`7100
`6.50
`6.00
`3.30
`5.00
`4.50
`4.00
`3.50
`3.00
`1.50
`2.00
`L50
`L00
`.50
`
`PRICE
`
`_4:l:l 1__ |.._|. .
`I
`is
`I0
`12 H 16
`2
`8
`In:
`10
`QUIIN TIT r
`
`221
`
`PERIOD I
`._l.:J.
`....I__
`4
`E
`I‘!
`
`I?
`
`Pi RIOD 3
`FLRIOD 1
`1
`I
`I
`.I._
`I
`_I
`12
`e
`-l
`15
`e
`A
`I!
`TRANSACTION uIJms.ItIsr f‘Hl|L)!)1
`
`PERIOD 4
`
`..
`15
`
`1
`4
`
`3
`
`I?
`
`In
`
`This Content downloaded from 208.184.134.166 on Sun, 23 Mar 2014 09:08:29 AM
`(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:79)(cid:82)(cid:68)(cid:71)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:21)(cid:19)(cid:27)(cid:17)(cid:20)(cid:27)(cid:23)(cid:17)(cid:20)(cid:22)(cid:23)(cid:17)(cid:20)(cid:25)(cid:25)(cid:3)(cid:82)(cid:81)(cid:3)(cid:54)(cid:88)(cid:81)(cid:15)(cid:3)(cid:21)(cid:22)(cid:3)(cid:48)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:19)(cid:28)(cid:29)(cid:19)(cid:27)(cid:29)(cid:21)(cid:28)(cid:3)(cid:36)(cid:48)
`All use subject to JSTOR Terms and Conditions
`(cid:36)(cid:79)(cid:79)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:45)(cid:54)(cid:55)(cid:50)(cid:53)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
`
`0008
`0008
`
`L50
`1.00
`
`2.50
`2.00
`L50
`1.00
`.50
`
`

`
`l.?XI’I'IRIl\-ll‘lT\7T!\L STUDY OF COMPETITIVE MARKET Bi-EH.‘-KVIOR
`
`119
`
`The tests in Chart 4 are of special
`interest from the point of view of the
`Walrasian hypothesis. In this case the
`supply curve is perfectly eIastic—all sell-
`ers have cards containing the price $3.10.
`Each seller has the same lower bound
`
`excess-rent hypothesis,
`later.’
`
`to be discussed
`
`equilibrium since there is a considerable
`excess supply at prices just barely above
`the equilibrium price. From the results
`we see that the market is not particularly
`slow in converging, but it converges to
`a fairly stable price about $0.20 above
`the predicted equilibrium. Furthermore,
`in test 4B, which was an extension of
`on his reservation price acceptance set.
`4A,
`the interjection of a decrease in
`CHART 4
`
`TEST 4A AND TEST 4-B
`
`loco
`5.80
`5.ao
`5.40
`5.20
`5.00
`4 .511
`A_b0
`
`4.20
`1.00
`mar 3.00
`3.60
`3.10
`3.10
`3.00.
`2.00
`2.60
`2.40
`
` 5.60
`3.20 200
`
`rruci
`
`5.40
`5.20
`100
`1.00
`4.60
`«.40
`4.20
`4.00
`3.00
`3&0
`3.50
`3.10
`3.00
`2.00
`2.60
`2.40
`223
`2.00
`
`I
`u
`
`1
`1:
`
`PERIOD 3
`PEIIDD 2
`PERIDDJ
`-I|rP.4|_.JJu.|It|sr||:.__1:
`13
`3!«'l'¥'135?9I351|"F135l'01357613571356
`'l'R..|N$lCIFON NUMBER WY FEMODJ
`
`IIII1I'
`
`5
`
`"
`I23-I56?
`QUAMTI II
`
`in this sense, there is no divergence of
`attitude among the sellers, though there
`might be marked variation in their bar-
`gaining propensities. According to the
`Walrasian hypothesis this market should
`exhibit
`rapid convergence toward the
`" The results are inconsistent with the so—caIle(l
`Harshallian hypothesis {the rate of increase in quan-
`tity exchanged is an increasing function of the excess
`of demand price over supply price), but
`this hy-
`pothesis would seem to be worth considering only
`in market processes in which some quantity-a.djust-
`iug decision is made by the marketers. The results
`of a pilot experiment in “short-run” and “long—run”
`equilibrium are displayed in the Appendix.
`
`demand from DD to D"D’ was ineffective
`
`as a means of shocking the market down
`to its supply and demand equilibrium.
`This decrease in demand was achieved
`
`by passing out new buyer cards corre-
`sponding to DD’ at the close of period
`4 in test 4.4. As expected, the market
`approaches equilibrium from above, since
`contracts at prices below equilibrium are
`impossible.
`The sellers in this market presented
`a solid front against price being lowered
`to “equilibrium.” In the previous mar-
`
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