Advance Production in Posted Offer Markets
Stuart Mestelman
McMaster University
Deborah Welland
University of Guelph
Douglas Welland
McMaster University
September 1986
Abstract
Data from market sessions in which production is to demand are compared with data from
sessions requiring that output decisions be made and production costs incurred prior to the start
of trading in each period. No inventory carry-over is permitted. differences in aggregate output
measures such as average contract price, sales, and market efficiency tend to disappear as traders
gain experience in an unchanging environment. However, the additional risk introduced by the
sunk cost aspect of advance production appears to offset any advantage regarding sellers' share
of the surplus conferred by the power to post prices.
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