NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Nature of Excess: Using Randomized Treatments to Investigate Price Dynamics

Omar Al-Ubaydli, John A. List, Michael K. Price

NBER Working Paper No. 16319
Issued in August 2010
NBER Program(s):   AP

This study explores empirically the price dynamics within two distinct market institutions - a double oral auction, which resembles modern asset markets, and a bilateral exchange market, which represents markets that have existed for centuries. To provide a theoretical basis to our investigation, we test and compare the excess supply model (Walras (1874, 1877, 1889, 1896)) and the excess rent model (Smith (1962, 1965)) in both market institutions. Our approach is unique in that we make use of appropriate demand and supply systems coupled with randomization of the main treatment variable to discriminate between the theories. All previous efforts, including Smith's (1965) seminal experiments, use designs that cannot appropriately parse the models. We report several insights, perhaps most importantly, we consistently reject the Walrasian model in favor of the excess rent model, regardless of market institution. This finding has important implications both positively and normatively.

download in pdf format
   (328 K)

email paper

This paper is available as PDF (328 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16319

Users who downloaded this paper also downloaded these:
Al-Ubaydli and List w17957 On the Generalizability of Experimental Results in Economics
List, Sadoff, and Wagner w15701 So you want to run an experiment, now what? Some Simple Rules of Thumb for Optimal Experimental Design
Kahle and Stulz w16310 Financial Policies and the Financial Crisis: How Important Was the Systemic Credit Contraction for Industrial Corporations?
Ludwig, Kling, and Mullainathan w17062 Mechanism Experiments and Policy Evaluations
Auerbach and Gorodnichenko w16311 Measuring the Output Responses to Fiscal Policy
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us