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Skills in the marketplace: Market efficiency, social orientation, and ability in a field-based experiment

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  • Fiala, Nathan

Abstract

Neoclassical economic theory predicts that markets will clear, leaving little or no marginal gains from trade. Laboratory experiments have largely confirmed this prediction, though the results of recent field experiments have been mixed, especially in developing countries. I create a multiround trading market in Uganda to explore the efficiency of trading and test whether traders’ personal traits are associated with market efficiency and individual bargaining success. To test the effects of individual traits, I utilize data on measures of the traders’ human and physical capital, risk and time preferences, and social orientation, specifically pro- and antisocial behavior and aggression. I find that the buyers’ and sellers’ relative levels of social orientation and human capital are associated with levels of market efficiency within rounds. Measures of social orientation, however, are less associated with individual success. I also find that rents obtained in the experiment are strongly associated with the wealth levels of participants two years later, but this association is limited to those who were randomly assigned to be buyers in the experiment. I present evidence that this association is driven by greater buyer bargaining ability.

Suggested Citation

  • Fiala, Nathan, 2015. "Skills in the marketplace: Market efficiency, social orientation, and ability in a field-based experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 174-188.
  • Handle: RePEc:eee:jeborg:v:120:y:2015:i:c:p:174-188
    DOI: 10.1016/j.jebo.2015.10.008
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    3. Antonio M. Espin & Francisco Reyes-Pereira & Luis F. Ciria, 2017. "Organizations should know their people: A behavioral economics approach," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 1(S), pages 41-48, November.

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    More about this item

    Keywords

    Experimental market; Market interactions; Market efficiency; Developing markets; Social orientation; Individual ability;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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