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Naturally occurring preferences and general equilibrium: a laboratory study

Crockett, Sean and Friedman, Daniel and Oprea, Ryan (2021) 'Naturally occurring preferences and general equilibrium: a laboratory study.' International Economic Review, 62 (2). pp. 831-859. ISSN 0020-6598

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Abstract

We examine whether economies constructed using experimentally measured preferences (for risk) tend to suffer from aggregation pathologies (like non-existence and multiplicity of equilibrium) cautioned by the Sonnenschein-Mantel-Debreu theorem. We show that aggregation pathologies should be expected to arise frequently in homogeneous exchange economies, but dwindle and eventually disappear as economies grow diverse. When subjects actually trade, general equilibrium predictions are accurate in most cases, and the failures occur only in economies a priori classifi ed as fragile to preference instability. Our study uses individual-level experimental data to address longstanding questions in general equilibrium theory that are unanswerable using prior methods.

Item Type: Article
Uncontrolled Keywords: Experimental Economics, General Equilibrium, Aggregation, Heterogeneity, Revealed Preferences
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 01 Dec 2021 11:56
Last Modified: 06 Jan 2022 14:21
URI: http://repository.essex.ac.uk/id/eprint/31784

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