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| Author: | Cassar, A. Friedman, D. Schneider, P.H. |
| Title: | A laboratory investigation of networked markets |
| Journal: | Economic Journal
2010 : SEP, VOL. 120:547, p. 919-943 |
| Index terms: | international trade industries efficiency markets networks |
| Language: | eng |
| Abstract: | It is questioned if interpersonal networks can improve market efficiency under not perfectly enforceable contracts. Certain exogenous networks are introduced into laboratory markets with traders having the possibility of cheating in 'international' but not in 'domestic' transactions. Four network configurations are examined, one of which has the potential to achieve 100 percent efficiency. The main qualitative trade patterns across the network configurations are correctly predicted through theoretical upper bounds, yet the efficiency is overpredicted. International trade volume is increased, domestic volume is reduced and high surplus transactions to international networks are diverted by the networks. |
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