Efficiency in Markets: Evidence from Classroom Experiments with a Cross-Section of Students from East and Central European Countries and the Former Soviet Union

Three experiments were run in Prague, Czech Republic to demonstrate to students the robustness of market institutions. Students participated in Vernon Smith's double-auction experiment, the double-auction with price controls, and Holt and Laury's (1997) voluntary provision of public goods experiment. Despite a large number of diverse students (121 students from 26 different countries), the expected and efficient outcomes were still realized. This is an especially powerful result given the fact that most of these participants were from post-Soviet countries where the institutions of private property and the rule of law are largely absent. This working paper reports these results and highlights thoughts from participants in the experiments. The paper also provides econometric evidence. This section examines how individuals with higher levels of education performed in the experiment (undergraduate or graduate student), whether one's college major (Economics, Political Science, International Relations, Philosophy, or History) mattered, whether one's gender mattered, and whether being an American student mattered.