Competition on Common Value Markets with Naive Traders - A Theoretical and Experimental Analysis

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Competition on Common Value Markets with Naive Traders - A Theoretical and Experimental Analysis

Author Info

Nadine Chlaß () (Max Planck Institute of Economics, Jena, Germany)
Werner Güth (Max Planck Institute of Economics, Jena, Germany.)

Abstract

Theoretically and experimentally, we generalize the analysis of acquiring a company (Samuelson and Bazerman 1985) by allowing for competition of both, buyers and sellers. Naivety of both is related to the idea that higher prices exclude worse qualities. While competition of naive buyers increases prices, competition of naive sellers promotes effciency enhancing trade. Our predictions are tested experimentally.

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Publisher Info
Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers in Economics with number 2007-105.

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Date of creation: 20 Dec 2007
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Handle: RePEc:jrp:jrpwrp:2007-105

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Find related papers by JEL classification:
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-01-19 (All new papers)
NEP-COM-2008-01-19 (Industrial Competition)
NEP-EXP-2008-01-19 (Experimental Economics)
NEP-MIC-2008-01-19 (Microeconomics)
NEP-MKT-2008-01-19 (Marketing)

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