Markets as Economizers of Information: Field Experimental Examination of the 'Hayek Hypothesis'

26 Pages Posted: 19 Feb 2011 Last revised: 5 Mar 2012

See all articles by Omar Al-Ubaydli

Omar Al-Ubaydli

George Mason University - Department of Economics

Peter J. Boettke

George Mason University - Department of Economics

Date Written: December 19, 2010

Abstract

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 central market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek's theories.

Keywords: Price Dynamics, Entrepreneurs, Field Experiment, Market Process

JEL Classification: B53, C90, D40, D51, D61, D82, L26

Suggested Citation

Al-Ubaydli, Omar and Boettke, Peter J., Markets as Economizers of Information: Field Experimental Examination of the 'Hayek Hypothesis' (December 19, 2010). GMU Working Paper in Economics No. 11-10. Available at SSRN: https://ssrn.com/abstract=1764269 or http://dx.doi.org/10.2139/ssrn.1764269

Omar Al-Ubaydli (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-4538 (Phone)
703-993-1133 (Fax)

Peter J. Boettke

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-1149 (Phone)
703-993-1133 (Fax)

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