Using Experiments to Inform the Privatization/deregulation Movement in Electricity

At the University of Arizona, electronic trading (now commonly known as e-commerce) in the experimental laboratory began in 1976 when Arlington Williams conducted the initial experiments testing the first electronic “double-auction” trading system, which he had programmed on the Plato operating system. The term “double auction” refers to the oral bid-ask sequential trading system used since the 19th century in stock and commodity trading on the organized exchanges. This system of trading has been used in economics experiments since the 1950s, and is extremely robust in yielding convergence to competitive equilibrium outcomes (Smith 1962, 1982a). Since information on what buyers are willing to pay, and sellers are willing to accept, is dispersed and strictly private in these experiments, the convergence results have been interpreted (Smith 1982b) as supporting F.A. Hayek’s thesis “that the most significant fact about