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Group identity in markets

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  • Li, Sherry Xin
  • Dogan, Kutsal
  • Haruvy, Ernan
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    Abstract

    We present a laboratory experiment that measures the effects of group identity--one's perceived membership in social groups--on market transactions in an oligopoly market with a few sellers and buyers. We artificially induce group identity using art preferences and college majors in different treatments, respectively. Subjects are randomly assigned into the roles of buyers and sellers and interact repeatedly. We find that the presence of groups influences both the selection of trading partners and the determination of prices. All else equal, sellers are more likely to make offers to ingroup buyers, and the buyers are more likely to accept offers from ingroup sellers. There are considerable intergroup price differentials with the outgroup sellers charging a lower price than the ingroup sellers.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 29 (2011)
    Issue (Month): 1 (January)
    Pages: 104-115

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    Handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:104-115

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    Web page: http://www.elsevier.com/locate/inca/505551

    Related research

    Keywords: Group identity Experiments Markets Bargaining;

    References

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    1. Asker, John & Cantillon, Estelle, 2004. "Properties of Scoring Auctions," CEPR Discussion Papers 4734, C.E.P.R. Discussion Papers.
    2. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1986. "Fairness and the Assumptions of Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages S285-300, October.
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    Cited by:
    1. Daniel John Zizzo, 2012. "Inducing natural group identity: A RDP analysis," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 12-01, School of Economics, University of East Anglia, Norwich, UK..

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