The Hayek hypothesis and long run competitive equilibrium: an experimental investigation

Shachat, J.; Zhang, Z.

Abstract

We report on an experiment investigating whether the Hayek Hypothesis (Smith, 1982) extends to the long run setting. We consider two environments; one with a production technology having a U-shaped long run average cost curve and a single competitive equilibrium, and another with a constant long run average cost curve. We present alternative efficient production plans as a menu of fixed and marginal cost pairs. In both environments, we observe convergence to long run competitive equilibrium prices and quantities typically within six long run decision horizons.

Citation

Shachat, J., & Zhang, Z. (2017). The Hayek hypothesis and long run competitive equilibrium: an experimental investigation. The Economic Journal, 127(599), 199-228. https://doi.org/10.1111/ecoj.12249

• Journal Article Type: Article
• Acceptance Date: Feb 6, 2015
• Online Publication Date: Oct 5, 2015
• Publication Date: Feb 1, 2017
• Deposit Date: Dec 18, 2014
• Publicly Available Date: Oct 5, 2017
• Journal: The Economic Journal
• Print ISSN: 0013-0133
• Electronic ISSN: 1468-0297
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 127
• Issue: 599
• Pages: 199-228
• DOI: https://doi.org/10.1111/ecoj.12249
• Keywords: Experiment, Double auction, Hayek hypothesis, Long run competitive equilibrium, Bounded rationality.
• Public URL: https://durham-repository.worktribe.com/output/1439567