Toward Laboratory Experiments of Markets for Policy Planning

Abstract

We discuss the importance of laboratory experiments in markets for policy planning. The effects of an economic policy on the entire economy are investigated by means of comparative statics. This methodology is justified by the stability of the market equilibrium because otherwise, it is not possible to predict effects on the basis of a new equilibrium resulting from a change in a policy variable. Hence, the stability of the market equilibrium should be examined not only theoretically but also experimentally. We present examples of a perfectly competitive equilibrium, which is unstable both theoretically and experimentally, and a monopolistically competitive equilibrium, which is stable theoretically but unstable experimentally.