Abstract for: Asymmetric commodity cycles: Evidence from an experimental market

Laboratory experiments of commodity markets have used the Cobweb design to investigate market dynamics. The predicted cycles of the Cobweb theory did not occur. Arango (2006) adds complexity and realism to the Cobweb model and observes stronger fluctuations and autocorrelation. He shows that these fluctuations are quite symmetric and similar to the behaviour observed in one category of markets. However the fluctuations are different from the asymmetric price behaviour observed in other commodity markets. We hypothesise that asymmetries could be caused by non-linear demand, different from the linear demand curve used by Arango. Consequently we replicate his experiment using a demand structure with constant price elasticity and dynamic adjustment. Similar to Arango, the supply side is complicated by capacity lifetimes and investment delays across treatments. Compared to the previous results, this experiment gives rise to larger fluctuations and stronger asymmetries