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Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay

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  • Gary E. Bolton
  • Axel Ockenfels

Abstract

We conducted a controlled field experiment on eBay and examined to what extent both social and competitive laboratory behavior is robust to institutionally complex real world markets with experienced traders, who selected themselves into these markets. EBay’s natural trading system provides bridges between lab and field environment that can be exploited to explore differences in behavior in the two environments. We find that many sellers do not make use of their commitment power as predicted by standard theories of both selfish and social behavior. However, a concern for equity strongly affects outcomes and reputation building in bilateral bargaining, while buyer competition effectively masks this concern and robustly yields equilibrium outcomes. The dichotomy of behaviors mirrors observations in laboratory research. Furthermore, we find that behavioral patterns in the field experiment mirror fully naturally occurring trading patterns in the market.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2241.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2241

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Keywords: eBay; auctions; behavioral economics; trust; market design;

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References

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Cited by:
  1. Shchetinin, Oleg, 2009. "Contracting Under Reciprocal Altruism," Working Papers in Economics, University of Gothenburg, Department of Economics 421, University of Gothenburg, Department of Economics.
  2. Axel Ockenfels, 2008. "Marktdesign und Experimentelle Wirtschaftsforschung," Working Paper Series in Economics, University of Cologne, Department of Economics 41, University of Cologne, Department of Economics.

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