Paper #105

Title:

Credit constraints in general equilibrium: Experimental results

Authors:

Antoni Bosch-Domènech and Joaquim Silvestre

Date:

October 1996

Abstract:

Our work attempts to investigate the influence of credit tightness or expansion on activity and relative prices in a multimarket set-up. We report on some double- auction, two-market experiments where subjects had to satisfy an inequality involving the use of credit. The experiments display two regimes, characterized by high and low credit availability. The critical value of credit at the common boundary of the two regimes has a compelling interpretation as the maximal credit use at the Arrow-Debreu equilibrium of the abstract economy naturally associated to our experimental environment. Our main results are that changes in the availability of credit: (a): have minor and unsystematic effects on quantities and relative prices in the high-credit regime, (b): have substantial effects, both on quantities and relative prices, in the low-credit regime.

Keywords:

Experimental, auctions, credit, general equilibrium, Leex

JEL codes:

C92, D44, D51

Area of Research:

Behavioral and Experimental Economics

Published in:

Economic Journal, 107, 444, (1997)

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