Interest in the effect of nonbinding price controls on double auction markets stems from two primary considerations. The double auction institution converges to a competitive allocation more rapidly, and with fewer participating agents than any other institution with which it has been compared (see Smith et al.). One way to improve our understanding of this important property is to determine what conditions, if any, can interfere with or retard this convergence process. Nonbinding price controls represent a condition that may affect this convergence process. Hence, if such effects can be documented, they will provide a body of data that any future proposed model of the double auction process should be able to explain. A second reason for studying the effect of nonbinding controls on the double auction is practical: The organized commodity exchanges “… often set limits on price fluctuations during any single day. When prices at any point during a day rise above or fall below the closing prices of the preceding day by more than the amount of the limit, no further trading for that day is permitted” (Walter Labys, p. 162). Consequently, commodity trading frequently occurs at prices near the level of nonbinding price floors or ceilings.

Mark Issac and Charles Plott report the results of twelve exploratory experiments in which various price control constraints are imposed on double auction markets.