Experimental Study of Interdependent Systems: Markets and Networks
Abstract
This report covers some of the first applications of laboratory experimental methods in economics to the problems of understanding the principles that govern adjustments in complex networks of markets exchange processes. Key experiments were conducted in several areas to determine the appropriateness of classical economics models. Because the nature of networks suggests the possibility of instability and because there was little previous understanding of how to study instability experimentally, little theory exists and virtually to previous experiments exist. The first step was to determine if classical theory had any value at all, so a broad investigation was initiated, as opposed to an in-depth study of a narrow issue. The results are that existing market theory receives considerable support. System tendencies are to move toward the predictions of equilibrium models so long as the dynamic theory supports such movements. In this regard a clear need for theories of disequilibrium is evident. Part of the research focused on what is becoming known as Information Aggregation Mechanisms. Special networks can be designed to collect 'soft' information held in the form of 'opinions and intuitions' based on limited but independently acquired observations by decentralized personnel.
Document Details
- Document Type
- Technical Report
- Publication Date
- Sep 01, 2002
- Accession Number
- ADA408933
Entities
People
- Charles R. Plott
Organizations
- California Institute of Technology