Competitive equilibria in overlapping generations Experiments

Summary The paper presents the results of four overlapping generations experiments performed at the California Institute of Technology. Overlapping generations markets were created in which each agent had a two period life span. With the exception of the first period, there were eight agents trading in each period; four buyers (two young and two old) and four sellers (two young and two old). Parameters were selected so that a small set of equilibria existed. The markets were open for twenty-nine periods with a demand shift occurring at the fifteenth and sixteenth periods.This work provides a method of computing all competitive equilibria for a class of environments—called the opposing shift environments. The main conclusion of the experiments is that the experimental price data converge to near the stationary portions of the competitive equilibria. Demographic dynamics are also explored as part of the price adjustment process. Dynamic features found in non-overlapping environments are also observed in the overlapping generations case.We thank E. J. Nanale, a Caltech undergraduate student, who helped design and conduct the experiments. Special thanks are due to Hsing Yang Lee for his help in adapting the Multiple Unit Double Auction Program to accomodate the overlapping generations environment and for his help with the data processing. We also thank David Grether who found a serious problem with the statistical analysis in an early draft. The research assistance of Kay-Yut Chen was also very valuable to the completion of this work. The comments and suggestions of P. Rangazas were very helpful. The research of the second author was supported in part by a National Science Foundation Grant and the California Institute of Technology Laboratory for Experimental Economics and Political Science.