Bargaining under ambiguity: some experimental evidence

Siddiqi, Hammad (2006) Bargaining under ambiguity: some experimental evidence. Economics Bulletin, 4 7: 1-7.

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Author Siddiqi, Hammad
Title Bargaining under ambiguity: some experimental evidence
Journal name Economics Bulletin   Check publisher's open access policy
ISSN 1545-2921
Publication date 2006-02-02
Sub-type Article (original research)
Open Access Status File (Publisher version)
Volume 4
Issue 7
Start page 1
End page 7
Total pages 7
Place of publication Nashville, TN, United States
Publisher Economics Bulletin
Language eng
Formatted 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.
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
 
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Created: Thu, 10 Jul 2014, 19:08:09 EST by Hammad Siddiqi on behalf of School of Economics