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2022 | OriginalPaper | Chapter

2. Introduction

Authors : Sabiou M. Inoua, Vernon L. Smith

Published in: Economics of Markets

Publisher: Springer International Publishing

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Abstract

The implicit axiom of price-taking behavior opens the question of who or what is giving prices, to what purpose, how they are formed initially, and how they adjust in response to changes in the economic environment. The early neoclassical innovators, writing nearly one hundred years after Adam Smith, were primarily concerned with applying their new tools to modeling the structure of economic interdependence in a market economy and were content with simplifying assumptions they believed facilitated that objective.

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previous chapter Prologue

next chapter Rediscovering Classical Economics in the Laboratory

The total number of subjects were in the range 12–30 in the typical experiment.

We will use wtp (wta) when we refer to the market aggregate distributions of individual wtp (wta) valuations.

Seventy-five percent of private product (gross domestic product less government expenditures) is non-re-tradable and the source of great endogenous market economic stability; all instability arises from the other twenty-five percent, most notably, the housing component. These field observations are paralleled in laboratory markets for nondurables (Clavin, 2020) and for assets (Palan, 2013).

References to goods or wants in lively demand, but that are “frivolous”, appear often in the works of Scotland’s famous economist. Adam Smith ([1776] 1904; vol. 1, pp. 174, 314, 328, 381, 387; vol. 2. pp. 261, 391, 394).

Thus, a small box of cornflakes and a quart of milk are complements. A small box of cornflakes and one of Wheaties are substitutes. A small box of cornflakes is preferred to a can of green beans.

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Title: Introduction
Authors: Sabiou M. Inoua
Vernon L. Smith
Publisher: Springer International Publishing
Book: Economics of Markets
Print ISBN: 978-3-031-08427-0

Electronic ISBN: 978-3-031-08428-7

Copyright Year: 2022
DOI: https://doi.org/10.1007/978-3-031-08428-7_2