Trading in networks

A normal form game experiment

Douglas Gale, Shachar Kariv

    Research output: Contribution to journalArticle

    Abstract

    This paper reports an experimental study of trading networks. Networks are incomplete in the sense that each trader can only exchange assets with a limited number of other traders. The greater the incompleteness of the network, the more intermediation is required to transfer the assets between initial and final owners. The uncertainty of trade in networks constitutes a potentially important market friction. Nevertheless, we find the pricing behavior observed in the laboratory converges to competitive equilibrium behavior in a variety of treatments. However, the rate of convergence varies depending on the network, pricing rule, and payofffunction.

    Original languageEnglish (US)
    Pages (from-to)114-132
    Number of pages19
    JournalAmerican Economic Journal: Microeconomics
    Volume1
    Issue number2
    DOIs
    StatePublished - Aug 1 2009

    Fingerprint

    Normal form games
    Experiment
    Traders
    Assets
    Experimental study
    Rate of convergence
    Competitive equilibrium
    Owners
    Market frictions
    Pricing behaviour
    Uncertainty
    Pricing rules
    Intermediation
    Incompleteness

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

    Cite this

    Trading in networks : A normal form game experiment. / Gale, Douglas; Kariv, Shachar.

    In: American Economic Journal: Microeconomics, Vol. 1, No. 2, 01.08.2009, p. 114-132.

    Research output: Contribution to journalArticle

    Gale, Douglas ; Kariv, Shachar. / Trading in networks : A normal form game experiment. In: American Economic Journal: Microeconomics. 2009 ; Vol. 1, No. 2. pp. 114-132.
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