9320044 Holt The posted-offer trading institution is one in which sellers post prices on a take-it-or-leave-it basis. Posted-offer results provide a basis of comparison with trading in less structured double-auction experiments. This project is motivated by three stylized facts from posted-offer experiments. The first involves explicit price-fixing conspiracies which can raise prices in laboratory posted-offer settings. The ineffectiveness of seller conspiracies in comparable double-auctions motivates the proposed work on whether collusion in posted-offer markets is undermined by opportunities for sellers to offer private discounts. Related experiments will examine the effects of contractual restrictions on discounting and on trade association reports. A second stylized fact is the poor response of posted-offer markets to demand shocks. One implication of this observation is that the price-posting process could generate price rigidities with Keynesian macroeconomic consequences. The proposed experiments involve simultaneous posting of wages and prices in a general equilibrium framework with fiat money. One goal is to study the real effects of nominal monetary shocks. The third issue arises from the generally weak competitive tendencies of posted-offer markets which suggest that prices might be raised sharply by the addition of small imperfections, such as search costs. The proposed experiments will evaluate several recent theoretical resolutions of this ("Diamond") paradox, i.e., that small imperfections can produce monopoly prices.
