Caltech Does Law of Supply and Demand Experiment Across the Globe
Economists at Caltech have analysed data from 2000 repetitions of the experiment to test the Law of Supply and Demand from across the globe. This was possible with a collaboration with the economics education company MobLab, which provides online experiments for students across the globe. This was a repetition of the experiment originally devised by Nobel Laureate Vernon Smith presently working at Chapman University. The Law of Supply and Demand states that equilibrium price will be reached soon by converging to a lower price offered in the market in a perfectly competitive scenario typically in a vegetable or fruits market.
The researchers said that results of the experiment done across the countries were almost the same with final equilibrium prices only differing by pennies. "The idea that buyer-seller markets are highly efficient and converge to a single price is in every textbook. It's called perfect competition. But it is based largely on a theory," says Colin Camerer, the Robert Kirby Professor of Behavioral Economics and Director of the T&C Chen Centre for Social and Decision Neuroscience. "Charlie Plott has done these market experiments all over the world, with younger children and other students, but the designs are not exactly the same. With MobLab, we were able to use the exact same experimental designs and show how incredibly reproducible these experiments really are."