An Experimental Examination of the Walrasian Tatonnement Mechanism

RAND JOURNAL OF ECONOMICS, Vol. 27, No. 4

Posted: 2 Oct 1996

See all articles by Corinne M. Bronfman

Corinne M. Bronfman

University of Arizona

Kevin McCabe

University of Minnesota - Twin Cities - Carlson School of Management

David P. Porter

California Institute of Technology

Stephen Rassenti

Economic Science Institute, Chapman University

Vernon L. Smith

Chapman University - Economic Science Institute; Chapman University School of Law

Abstract

This is a systematic experimental comparison of the efficiency and competitive properties of a computerized multiunit tatonnement with or without a dynamic improvement rule, with or without publicity of order flow information. All versions of the tatonnement are comparatively less efficient than the continuous double auction. The tatonnement yields competitive prices, but both sides tend to underreveal demand/supply, causing inefficiency. Only the full-information, no-improvement-rule version of the tatonnement procedure approaches the efficiency of the double auction.

JEL Classification: C6, D5

Suggested Citation

Bronfman, Corinne M. and McCabe, Kevin and Porter, David P. and Rassenti, Stephen and Smith, Vernon L., An Experimental Examination of the Walrasian Tatonnement Mechanism. RAND JOURNAL OF ECONOMICS, Vol. 27, No. 4, Available at SSRN: https://ssrn.com/abstract=3374

Corinne M. Bronfman

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

Kevin McCabe

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
669 Management and Economics
Minneapolis, MN 55455
United States
612-624-9393 (Phone)
612-626-7795 (Fax)

David P. Porter

California Institute of Technology ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States
818-405-9841 (Fax)

Stephen Rassenti

Economic Science Institute, Chapman University ( email )

One University Drive
Wilkinson Hall 104
Orange, CA 92866
United States
714-628-2802 (Phone)

Vernon L. Smith (Contact Author)

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States
714-628-2830 (Phone)

Chapman University School of Law ( email )

One University Drive
Orange, CA 92866-1099
United States

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