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Market Culture: How Rules Governing Exploding Offers Affect Market Performance

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  • Muriel Niederle
  • Alvin E. Roth

Abstract

Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted, and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. (JEL C91, D40, D81)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 1 (2009)
Issue (Month): 2 (August)
Pages: 199-219

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Handle: RePEc:aea:aejmic:v:1:y:2009:i:2:p:199-219

Note: DOI: 10.1257/mic.1.2.199
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Cited by:
  1. Mark Armstrong & Jidong Zhou, 2011. "Exploding Offers and Buy-Now Discounts," Economics Series Working Papers 575, University of Oxford, Department of Economics.
  2. Gary Bolton & Ben Greiner & Axel Ockenfels, 2013. "Engineering Trust: Reciprocity in the Production of Reputation Information," Management Science, INFORMS, vol. 59(2), pages 265-285, January.
  3. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  4. Itay Fainmesser, 2010. "Social Networks and Unraveling in Labor Markets," Working Papers 2010-15, Brown University, Department of Economics.
  5. Phillips, Owen R. & Menkhaus, Dale J., 2010. "The culture of private negotiation: Endogenous price anchors in simple bilateral bargaining experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 705-715, December.
  6. Coles, Peter Andrew & Levine, Phillip B. & Roth, Alvin E. & Cawley, John & Niederle, Muriel & Siegfried, John J., 2010. "The Job Market for New Economists: A Market Design Perspective," Scholarly Articles 5343168, Harvard University Department of Economics.
  7. Lee, Kangoh, 2012. "Early selection and moral hazard," Economics Letters, Elsevier, vol. 116(2), pages 139-142.
  8. Muriel Niederle & Leeat Yariv, 2009. "Decentralized Matching with Aligned Preferences," NBER Working Papers 14840, National Bureau of Economic Research, Inc.

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