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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

  • Eline C.M. van der Heijden

    (Tilburg University)

  • Jan H.M. Nelissen

    ()
    (Erasmus University Rotterdam)

  • Harrie A.A. Verbon

    (Tilburg University)

Abstract

This paper investigates whether transactions where the buyer (or the seller) always moves first, andthe seller (or the buyer) always moves second in the exchange gives higher payoffs than exchangesin which it is randomly determined who moves first. We examine the effect of two treatmentvariables: Partners versus Strangers and fixed versus changing positions. We find that both withfixed and with changing positions, second movers take advantage of their position by exploitingthe first mover by "not delivering" the demanded good. However, with fixed positions exploitationoccurs significantly less while reciprocal exchanges happen more often. In spite of this, it turns outthat with fixed positions payoffs are very unevenly distributed. Unequal payoff distributions occurboth under Partners and Strangers, but they appear to be more extreme among Strangers.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-089/3.

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Date of creation: 03 Oct 2001
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Handle: RePEc:dgr:uvatin:20010089

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Web page: http://www.tinbergen.nl

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Keywords: experiments; exchange; partners; role assignment;

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  1. Forsythe, Robert & Lundholm, Russell & Rietz, Thomas, 1999. "Cheap Talk, Fraud, and Adverse Selection in Financial Markets: Some Experimental Evidence," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 481-518.
  2. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  3. Heijden, E.C.M. van der & Nelissen, J.H.M. & Potters, J.J.M. & Verbon, H.A.A., 2001. "Simple and Complex Gift Exchange in the Laboratory," Open Access publications from Tilburg University urn:nbn:nl:ui:12-88505, Tilburg University.
  4. Heijden, E.C.M. van der & Nelissen, J.H.M. & Potters, J.J.M. & Verbon, H.A.A., 1998. "The poverty game and the pension game: The role of reciprocity," Open Access publications from Tilburg University urn:nbn:nl:ui:12-76585, Tilburg University.
  5. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  6. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
  7. van der Heijden, Eline C M, et al, 2001. "Simple and Complex Gift Exchange in the Laboratory," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 280-97, April.
  8. 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.
  9. Lensberg, T. & Heijden, E.C.M. van der, 1998. "A cross-cultural study of reciprocity, trust and altruism in a gift exchange experiment," Discussion Paper 1998-77, Tilburg University, Center for Economic Research.
  10. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October.
  11. Georg Kirchsteiger & Ernst Fehr & Simon Gächter, 1996. "Reciprocal fairness and noncompensating wage differentials," ULB Institutional Repository 2013/5921, ULB -- Universite Libre de Bruxelles.
  12. Weimann, Joachim, 1994. "Individual behaviour in a free riding experiment," Journal of Public Economics, Elsevier, vol. 54(2), pages 185-200, June.
  13. 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.
  14. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
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