Advance Production in Experimental Markets

The effects of advance production in posted offer and double auction markets are investigated. Previously observed differences between these institutions in mean contract prices and in the distribution of producers' and consumers' surpluses under the production to demand condition disappear when sellers make output decisions and incur production costs prior to the start of trading. The double auction institution remains more efficient under advance production. The results suggest that the differential effects of alternative trading institutions on market outcomes may be partially offset by the production conditions characterizing a market.