Which of the following is generally true about the double auction market mechanisms implemented by Vernon Smith?
A) Prices will tend to stay below the equilibrium price or at best converge to the equilibrium from below as long as the magnitude of the consumer surplus is smaller than the magnitude of the producer surplus.
B) Prices will stay tend to stay above the equilibrium price or at best converge to the equilibrium from above as long as the magnitude of the consumer surplus is smaller than the magnitude of the producer surplus.
C) Prices will converge smoothly to the equilibrium price as long as the magnitude of the consumer surplus is smaller than the magnitude of the producer surplus.
D) Prices will tend to be higher than the market equilibrium price due to tacit collusion and signalling on the part of the sellers.

Question

Quizplus · Accepted Answer

In double auction market mechanisms, as demonstrated by Vernon Smith, prices tend to converge to the equilibrium price from below when the consumer surplus is smaller than the producer surplus, reflecting the dynamics of supply and demand adjustments.

Which of the Following Is Generally True About the Double