2005 Fiscal Year Final Research Report Summary
Designing the Japanese Central Rice Market : Theoretical and Experimental Studies
| Project/Area Number |
14330003
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| Research Category |
Grant-in-Aid for Scientific Research (B)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
経済理論
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| Research Institution | Shinshu University |
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Principal Investigator |
NISHIMURA Naoko Shinshu University, Department of Economics, Professor, 経済学部, 教授 (30218200)
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| Co-Investigator(Kenkyū-buntansha) |
SAIJO Tatsuyoshi Osaka University, Institute of Social and Economic Research, Professor, 社会経済研究所, 教授 (20205628)
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| Project Period (FY) |
2002 – 2005
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| Keywords | Auction / Experiments / Sealed bids / Institution Design |
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| Research Abstract |
One third of Japanese rice is transacted in Japanese central rice market, which is a one-sided multi-unit auction. Participants are one seller who places a sealed ask bid and buyers who submit sealed offer bids. All the offers whose average exceeds seller's ask bid are winning bids, and buyers pay at their bids. Ever since the central rice market was established, they have experienced a steady decline of rice prices. The object of this research is to examine implications of the transaction rules of rice market theoretically as well as experimentally, and propose a new market rule which is capable of reflecting demand and supply conditions more accurately.
The seller is a co-op and buyers are wholesalers. They are regulars in a market, and possess quite sufficient amount of knowledge about each other. This leads us to model the rice market as a complete information bidding game, though it is not conventional to employ such information setting for auction market analysis. In the theoretic
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al part, we show that a market has multiple Nash equilibria that covers a wide range of allocation outcomes including both competitive and monopolistic ones. It implies that even though the central market is a one-sided seller's market, it does not always generate monopoly price. Furthermore, we show that it has unique proper equilibrium generating outcomes in the close neighborhood of competitive equilibrium.
The rice market has another particular rule that gives a ceiling to the seller's ask price. When we look at a rice market as a two round sequential auction, the ask price restriction may induce the seller to place a beginning ask price relatively high in order to avoid limiting her choice in the next round.
Our experimental examinations generally support the above theoretical implications. This implies that the steady decline of rice prices, with which policy makers are concerned, may only be a logical consequence of rice market mechanism hat induces competitive equilibrium. In addition, having ask price restriction would obstruct the proper market function, in unpredictable way.
As we investigating the second-price auction in comparison with the rice market under the complete information, we have noticed that subjects may behave differently compared to the incomplete information setting, in a respect somewhat psychological. Then, it is quite questionable whether the isomorphism between the second price auction and the ascending bid auction would still be maintained under such circumstances. Exploration on this topic will be of our future research. Less
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