Journal article
Bargaining under ambiguity: Some experimental evidence
Economics Bulletin, Vol.4(7), pp.1-7
2006
Abstract
This paper investigates the price behavior in an experimental market in which participants are only aware of their own private values and do not possess information about the demand and supply curves, hence face ambiguity. The paper finds that when demand is flatter (more elastic) than the supply curve in price-quantity space then price approaches equilibrium from below, that is, all trades initially occur below the equilibrium price. However, if demand is steeper (less elastic) than supply, then the equilibrium price is reached from above. A simple rationale for this result is that in the first round of trading, participants tend to split the surplus from trading evenly among themselves since they are unaware of the equilibrium price. However, in subsequent rounds price quickly converges to the equilibrium as the equilibrium is discovered through repeated interactions.
Details
- Title
- Bargaining under ambiguity: Some experimental evidence
- Authors
- Hammad Siddiqi (Author) - Lahore University of Management Science, Pakistan
- Publication details
- Economics Bulletin, Vol.4(7), pp.1-7
- Publisher
- Economics Bulletin
- Date published
- 2006
- ISSN
- 1545-2921; 1545-2921
- Organisation Unit
- School of Business and Creative Industries; University of the Sunshine Coast, Queensland; USC Business School - Legacy
- Language
- English
- Record Identifier
- 99451464802621
- Output Type
- Journal article
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