In his prologue to the theory of speculation, Samuelson (1966a, p. 947 and passim) deals exclusively with the case of “foreseen changes in future supply and demand” in outlining a theory of intertemporal competitive price-quantity equilibria in markets that are subject to speculation. The analysis was considered to be a preliminary step to the more complicated cases involving uncertainty. Modern extensions of the theory (Mandelbrot, 1971; Samuelson, 1972; Schimmler, 1973) to include uncertainty have been accompanied by such vestiges of this original “perfect knowledge” model (e.g., common, well-defined expectations) as demanded, perhaps by the limitations of mathematical machinery and imagination for restructuring the theory.

Samuelson provides an extension to intertemporal markets of the assumption made by some writers that “perfect” knowledge in the sense of foreknowledge of market supply and demand is a precondition for competitive equilibrium in stationary markets. However, it is now well established by many experimental replications that knowledge of market supply and demand is not a necessary and may not be a sufficient condition for classical competitive equilibria to be achieved when a stationary market is organized under auction rules. Such knowledge is not necessary because in experiments in which subject participants know only their own supply and demand valuations contract prices demonstrably converge to or deviate only slightly from the theoretical equilibrium (Smith, 1974, pp. 7–15); knowledge of supply and demand may not be sufficient because under supply and demand conditions in which the entire exchange surplus is received by buyers (and all subjects are informed of these conditions), equity c onsiderations seem to retard and in some instances may preclude convergence to the classical (i.e., no externalities) competitive equilibrium (Smith, 1975, pp. 11—12).