Chapter 43 Price Discovery and Allocation in Chains and Networks of Markets

The experiments reported in this chapter explore the interaction of networks of markets. The issue is whether, and how long, chains of markets separated in time, space and participants might behave. The setting can be interpreted in two different ways. One is a system of vertical markets in which tiers of intermediate goods are produced as inputs for the next, higher level on the way to a final consumption good. Another, and perhaps more graphic, interpretation is geographic, in which suppliers are located at one location and consumers are at a different location. They are connected by a series of short transportation hauls that must be undertaken by different transporters. No transporter can undertake a long haul from seller to consumer. Markets exist at the beginning and end of each short haul. That is, the first transporters/middlemen buy from sellers and transport to the first drop-off for sale there.