Voting rules and endogenous trading institutions: An experimental study
AbstractThis paper reports on recurring laboratory elections in which buyers and sellers choose institutional rules to govern a subsequent trading round. The bid auction (buyers propose prices), offer auction (sellers suggest prices) and double auction (both trader types initiate price quotes) make up the electoral candidates. Both plurality rule and approval voting are used as vote-counting schemes. The former allows each trader to vote for at most one auction, whereas approval voting permits voters to either abstain or to vote for one, two or all three institutional alternatives. The main result is threefold.First, plurality rule induces a Duverger effect in the sense that just the bid and offer auction emerge as viable auctions. Approval voting instead leads to close three-way races with each of the three auctions winning approximately one third of the elections. Second, buyers (sellers) in the plurality rule sessions concordantly vote for the bid (offer) auction. Approval voting behavior is comparatively more heterogeneous. Third, bid auction prices are significantly lower than double auction prices, which again are significantly below offer auction prices.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 17/2002.
Length: 38 pages
Date of creation: 17 Jun 2003
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
Plurality rule; approval voting; sequential auctions; experimental economics;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Walker, James M. & Williams, Arlington W., 1988. "Market behavior in bid, offer, and double auctions : A Reexmination," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 301-314, April.
- Jonathan Levin & Barry Nalebuff, 1995. "An Introduction to Vote-Counting Schemes," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 3-26, Winter.
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83, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Ketcham, Jon & Smith, Vernon L & Williams, Arlington W, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Wiley Blackwell, vol. 51(4), pages 595-614, October.
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