Learning and market clearing: theory and experiments

Carlos Alós-Ferrer, Georg Kirchsteiger

Research output: Contribution to journalArticlepeer-review


This paper investigates theoretically and experimentally whether traders learn to use market-clearing trading institutions or whether other (inefficient) market institutions can survive in the long run. Using a framework with boundedly rational traders, we find that market-clearing institutions are always stable under a general class of learning dynamics. However, we show that there exist other, non-market-clearing institutions that are also stable. Therefore, in the long run, traders may fail to coordinate exclusively on market-clearing institutions. Using a replica-economies approach, we find the results to be robust to large market size. The theoretical predictions were confirmed in a series of platform choice experiments. Traders coordinated on platforms predicted to be stable, including market-clearing as well as non-market-clearing ones, while platforms predicted to be unstable were avoided in the long run.

Original languageEnglish (US)
Pages (from-to)203-241
Number of pages39
JournalEconomic Theory
Issue number2
StatePublished - Oct 1 2015


  • Coordination
  • Learning
  • Market clearing
  • Market institution

ASJC Scopus subject areas

  • Economics and Econometrics


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