ABSTRACT
This chapter considers several positive theories of the price formation and exchange process for the class of experimental exchange markets called Double Oral Auctions. It examines three of these theories in detail and argues that one of them seems to be the most consistent with the data. These theories are expectations, reservation prices, and bidding strategies. The chapter describes the theory as a first step towards constructing a positive theory of the process of exchange and price formation in many other markets. The chapter discusses seminars at Cornell, Northwestern, and Stony Brook, and an NSF Conference on Experimental Economics at the University of Arizona. There is a target for experimentalists to reject with data or for theorists to improve on by obtaining a better fit to the data. The task of constructing a new type of theory to explain a new type of data derived from nascent experimental markets was actually begun by people in 1978.
