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Does laboratory trading mirror behavior in real world markets? Fair bargaining and competitive bidding on eBay

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Author Info

  • Bolton, Gary E.
  • Ockenfels, Axel

Abstract

Laboratory market experiments observe a sharp dichotomy between (selfish) competitive behavior and fair-minded social behavior depending on competitive conditions. While the dichotomy is consistent with social preference theory, the often advanced hypothesis that social behavior is an artifact of laboratory conditions has not heretofore been ruled out. We tested these competing hypotheses in a field experiment on eBay conducted with experienced traders. The buyer behavior we observe strongly confirms the social preference hypothesis. Also, the behavioral patterns in the field experiment mirror fully naturally occurring trading patterns in the market. For instance, some sellers do not use their commitment power as predicted by theories of both selfish and social behavior, with the pattern of deviation reflecting traders’ market experience outside the experiment.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 97 (2014)
Issue (Month): C ()
Pages: 143-154

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Handle: RePEc:eee:jeborg:v:97:y:2014:i:c:p:143-154

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Competitive pricing; Fairness; eBay; Bargaining; Auction;

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References

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Cited by:
  1. Shchetinin, Oleg, 2009. "Contracting under Reciprocal Altruism," TSE Working Papers 09-078, Toulouse School of Economics (TSE).
  2. Axel Ockenfels, 2008. "Marktdesign und Experimentelle Wirtschaftsforschung," Working Paper Series in Economics 41, University of Cologne, Department of Economics.

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