Production, Trade and Exchange Rates in Large Experimental Economies

We construct experimental economies for the purpose of studying market equilibration. The economies are the most complex laboratory economies studied to date and are “international” in economic structure. The economies have twenty-one markets and due to the fact that they have on the order of 50 agents, the economies are characterized by several hundred equations. In spite of the complexity and interdependence of the economy, the results demonstrate the substantial power of the general equilibrium model of perfect competition to predict directions of movements of market-level variables. Exploratory analysis yields patterns frequently found in field studies. For example, international trade patterns conform closely to the gravity model and exhibit a strong home bias.