Division of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 Principles of Continuous Price Determination in an Experimental Environment with Flows of Random Arrivals and Departures
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چکیده
This paper develops a new experimental environment for the study of markets. The period structure of classical experimental markets, which is known to play an important role in the equilibration process, is replaced by an environment with a structure in which new incentives arrive randomly and continuously throughout. The issue posed is whether or not classical principles of market behavior apply in worlds where the environment is constantly changing. We develop an experimental methodology within which the issue can be studied. We report: (1) natural flow generalizations of the classical laws of demand and supply operate to dictate much of the behavior observed in the markets; (2) two different classes of laws operate: one we call the “temporal equilibrium”, which is based on the parameters that exist in the market at a moment of time, and the second is the “flow competitive equilibrium,” which reflects the underlying probabilistic structure of the parameters; and (3) the markets themselves exhibit extraordinarily high levels of efficiency.
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