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Should the same side of the market always move first in a transaction? : an experimental study

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Author Info
Heijden, E.C.M. van der
Nelissen, J.H.M.
Verbon, H.A.A. (Tilburg University, Center for Economic Research)

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Abstract

This paper investigates whether transactions where the buyer (or the seller) always moves first, and the seller (or the buyer) always moves second in the exchange gives higher payoffs than an exchange in which it is randomly determined who moves first. We examine the effect of two treatment variables: Partners versus Strangers and fixed versus changing positions. We do not find much economic justification for establishing fixed roles in exchange relationships. Both with fixed and with changing positions, second movers take advantage of their position by exploiting the first mover by "not delivering" the demanded good. In the fixed positions treatments, exploitation occurs significantly less while reciprocal exchanges happen more often. In spite of this, it turns out that with fixed positions payoffs are very unevenly distributed. Unequal payoff distributions occur both under Partners and Strangers, but they appear to be more extreme among Strangers.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 103.

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Date of creation: 2000
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Handle: RePEc:dgr:kubcen:2000103

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Find related papers by JEL classification:
C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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  1. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers iewwp040, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  2. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December. [Downloadable!] (restricted)
  3. Guth, Werner & Huck, Steffen & Rapoport, Amnon, 1998. "The limitations of the positional order effect: Can it support silent threats and non-equilibrium behavior?," Journal of Economic Behavior & Organization, Elsevier, vol. 34(2), pages 313-325, February. [Downloadable!] (restricted)
  4. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May. [Downloadable!] (restricted)
  5. Weimann, Joachim, 1994. "Individual behaviour in a free riding experiment," Journal of Public Economics, Elsevier, vol. 54(2), pages 185-200, June. [Downloadable!] (restricted)
  6. Eline C.M. van der Heijden & Jan H.M. Nelissen & Jan J.M. Potters & Harrie A.A. Verbon, 2001. "Simple and Complex Gift Exchange in the Laboratory," Tinbergen Institute Discussion Papers 01-087/3, Tinbergen Institute. [Downloadable!]
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  7. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers iewwp004, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  8. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October. [Downloadable!] (restricted)
  9. Ernst FEHR & Simon GÄCHTER & Georg KIRCHSTEIGER, 1994. "Reciprocal Fairness and Noncompensating Wage Differentials," Vienna Economics Papers vie9401, University of Vienna, Department of Economics.
  10. Camerer, Colin F & Thaler, Richard H, 1995. "Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-19, Spring. [Downloadable!] (restricted)
  11. Van der Heijden, Eline C. M. & Nelissen, Jan H. M. & Potters, Jan J. M. & Verbon, Harrie A. A., 1998. "The poverty game and the pension game: The role of reciprocity," Journal of Economic Psychology, Elsevier, vol. 19(1), pages 5-41, February. [Downloadable!] (restricted)
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  1. Gary Charness & Margarida Corominas-Bosch & GUILLAUME FRECHETTE, 2005. "Bargaining and Network Structure: An Experiment," University of California at Santa Barbara, Economics Working Paper Series 05-05, Department of Economics, UC Santa Barbara. [Downloadable!]
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