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Experimental Economics

, Volume 20, Issue 3, pp 707–735 | Cite as

Distributing scarce jobs and output: experimental evidence on the dynamic effects of rationing

  • Guidon Fenig
  • Luba Petersen
Original Paper

Abstract

How does the allocation of scarce jobs and production influence their supply? We present the results of a macroeconomics laboratory experiment that investigates the effects of alternative rationing schemes on economic stability. Participants play the role of worker-consumers who interact in labor and output markets. All output, which yields a reward to participants, must be produced through costly labor. Automated firms hire workers to produce output so long as there is sufficient demand for all production. In every period either output or labor hours are rationed. Random queue, equitable, and priority (i.e., property rights) rationing schemes are compared. Production volatility is the lowest under a priority rationing rule and is significantly higher under a scheme that allocates the scarce resource through a random queue. Production converges toward the steady state under a priority rule, but can diverge to significantly lower levels under a random queue or equitable rule where there is the opportunity for and perception of free-riding. At the individual level, rationing in the output market leads consumer-workers to supply less labor in subsequent periods. A model of myopic decision-making is developed to rationalize the results.

Keywords

Rationing Allocation rules Unemployment Experimental macroeconomics Laboratory experiment General equilibrium 

JEL Classification

C92 E13 H31 H4 E62 

Supplementary material

10683_2016_9507_MOESM1_ESM.pdf (2 mb)
Supplementary material 1 (PDF 2,005 kb)

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Copyright information

© Economic Science Association 2017

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of SaskatchewanSaskatoonCanada
  2. 2.Simon Fraser UniversityBurnabyCanada

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