Al-Ubaydli, Omar and Boettke, Peter (2010): Markets as economizers of information: Field experimental examination of the “Hayek Hypothesis”.
Download (132Kb) | Preview
The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the ‘Hayek hypothesis’: equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in the absence of price-taking behavior and centralized market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental market data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek’s theories.
|Item Type:||MPRA Paper|
|Original Title:||Markets as economizers of information: Field experimental examination of the “Hayek Hypothesis”|
|Keywords:||price dynamics; entrepreneurs; field experiment; market process|
|Subjects:||C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
D - Microeconomics > D4 - Market Structure and Pricing > D40 - General
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies
B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B53 - Austrian
|Depositing User:||Omar Al-Ubaydli|
|Date Deposited:||27. Dec 2010 11:03|
|Last Modified:||11. Feb 2013 20:06|
Akerlof, G., 1970. The market for “Lemons”: Quality uncertainty and the market mechanism. Quarterly Journal of Economics 84, 488-500.
Alevy, J., Haigh, M., List, J., 2007. Information cascades: Evidence from a field experiment with financial market professionals. Journal of Finance 62, 151-180.
Berg, J., Dickhaut, J., McCabe, K., 1995. Trust, reciprocity and social history. Games and Economic Behavior 10, 122-142.
Chamberlin, E., 1948. An experimental imperfect market. Journal of Political Economy 56, 95-108.
Davis, D., Holt, C., 1993. Experimental Economics. Princeton: Princeton University Press
Falk, A., Heckman, J., 2009. Lab experiments are a major source of knowledge in the social sciences. Science 326, 535-538.
Frydman, R., 1982. Towards an understanding of market processes: Individual expectations, learning, and convergence to rational expectations equilibrium. American Economic Review 72, 652-668.
Gale, D., 1987. Limit theorems for markets with sequential bargaining. Journal of Economic Theory 43, 20-54.
Haigh, M., List, J., 2009. Investment under uncertainty: Testing the options model with professional traders. Review of Economics and Statistics 92, 974-984.
Harrison, G., List, J., 2004. Field experiments. Journal of Economic Literature 42, 1009-1055.
Harrison, G., List, J., 2008. Naturally occurring markets and exogenous laboratory experiments: A case study of the winner’s curse. Economic Journal 118, 822-843.
Hayek, F., 1940. Socialist calculation: The competitive ‘Solution’. Economica 7, 125-149.
Hayek, F., 1945. The use of knowledge in society. American Economic Review 35, 519-530.
Hayek, F., 1948. Individualism and Economic Order. Chicago: University of Chicago Press.
Hayek, F., 1967. Competition as a discovery procedure. Quarterly Journal of Austrian Economics 5, 9-23.
Jin, G., Kato, A., 2006. Price, quality, and reputation: Evidence from an online field experiment. RAND Journal of Economics 37, 983-1004.
Tversky, A., Kahneman, D., 1991. Loss aversion in riskless choice: A reference-dependent model. Quarterly Journal of Economics 106, 1039-1061.
Kagel, J., Roth, A., 1997. The Handbook of Experimental Economics. Princeton: Princeton University Press.
Kirzner, I., 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press.
Levitt, S., List, J., 2007. What do laboratory experiments measuring social preferences reveal about the real world?. Journal of Economic Perspectives 21, 153-174.
List, J., 2004a. Testing neoclassical competitive theory in multilateral decentralized markets. Journal of Political Economy 112, 1131-1156.
List, J., 2004b. Neoclassical theory versus prospect theory: Evidence from the marketplace. Econometrica 72, 615-625.
List, J., 2006. The behavioralist meets the market: Measuring social preferences and reputation effects in actual transactions. Journal of Political Economy 114, 1-37.
List, J., Price, M., 2006. Conspiracies and secret price discounts in the marketplace: Evidence from the field. RAND Journal of Economics 36, 700-717.
Mises, L., 1949. Human Action. New Haven: Yale University Press.
Phelps, E., 2006. Macroeconomics for a Modern Economy. http://nobelprize.org/nobel_prizes/economics/laureates/2006/phelps_lecture.pdf
Resnick, P., Zeckhauser, R., Swanson, J., Lockwood, K., 2006. The value of reputation on eBay: A controlled experiment. Experimental Economics 9, 79-101.
Rubinstein, A., Wolinsky, A., 1985. Equilibrium in a market with sequential bargaining. Econometrica 53, 1133-1150.
Smith, V., 1962. An experimental study of competitive market behavior. Journal of Political Economy 70, 111-137.
Smith, V., 1965. Experimental auction markets and the Walrasian hypothesis. Journal of Political Economy 73, 387-393.
Smith, V., 1976. Experimental economics: Induced value theory. American Economic Review 66, 274-279.
Smith, V., 1982. Markets as economizers of information: Experimental examination of the Hayek hypothesis. Economic Inquiry 20, 165-179.
Smith, V., Suchanek, G., Williams, A., 1988. Bubbles, crashes and endogenous expectations in experimental spot asset markets. Econometrica 56, 1119-1151.
Thaler, R., 1998. Anomalies: The winner’s curse. Journal of Economic Perspectives 2, 191-202.
Wolinsky, A., 1988. Dynamic markets with competitive bidding. Review of Economic Studies 55, 71-84.
Wolinsky, A., 1990. Information revelation in a market with pairwise meetings. Econometrica 58, 1-23.
Available Versions of this Item
- Markets as economizers of information: Field experimental examination of the “Hayek Hypothesis”. (deposited 27. Dec 2010 11:03) [Currently Displayed]