Abstract
In this article, the authors analyze data accumulated over 10+ years of teaching market interaction using a simple classroom experiment. The experiment is designed to teach first-year undergraduate students the basics of supply and demand and market efficiency. In total, they analyze data from 85 teaching sessions and 243 individual markets. They find that traded prices typically (90% of the time) move in accordance with market equilibrium comparative statics. They also find that average traded prices are rarely (5% of the time) consistent with market equilibrium but typically (70% of the time) “close” to the equilibrium. The traded quantity is often (60% of the time) more than equilibrium, which results in a loss of efficiency. The law of one price is strongly rejected.
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