Exchange and Specialisation as a Discovery Process*

Authors


  • *

     The data and instructions are available upon request. We thank Jeffrey Kirchner for writing the software and the International Foundation for Research in Experimental Economics for financial support. We gratefully acknowledge comments by two anonymous referees, Leonardo Felli, Vince Crawford, Doug Davis, John Duffy, Matt Jackson, Preston McAfee, Stephen Spear, Ted Temzelides and seminar participants at Caltech, Colby College, University of Connecticut, University of Edinburgh, George Mason University, Miami University, the University of Pittsburgh, Virginia Commonwealth University, the 2005-06 Gruter Institute Conferences, the 2005 international ESA meeting in Montreal, the 2005 SAET conference in Vigo and the 2005 SEA annual meeting in Washington, DC.

Abstract

In this article we study the performance of an economy that can support specialisation if the participants develop and follow some system of exchange. We define a closed economy in which the participants must discover the ability to exchange, implement it, and ascertain what they are comparatively advantaged in producing. Many of our participants demonstrate the ability to find comparative advantage, capture gains from trade and effectively choose production that is consistent with the choices of others. We explore various treatments to provide insight into the conditions that foster the growth of specialisation and exchange within this weak institutional framework.

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