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 only the bid and offer auctions 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 Research Department of Statistics Norway in its series Discussion Papers with number 328.
Date of creation: Aug 2002
Date of revision:
Plurality rule; approval voting; sequential auctions; experimental economics.;
Find related papers by JEL classification:
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-04 (All new papers)
- NEP-CDM-2003-06-04 (Collective Decision-Making)
- NEP-EXP-2003-06-04 (Experimental Economics)
- NEP-FIN-2003-06-04 (Finance)
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.:
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