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Should the Same Side of the Market always move first in a Transaction? An Experimental Study

Author

Listed:
  • 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.

Suggested Citation

  • Eline C.M. van der Heijden & Jan H.M. Nelissen & Harrie A.A. Verbon, 2001. "Should the Same Side of the Market always move first in a Transaction? An Experimental Study," Tinbergen Institute Discussion Papers 01-089/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20010089
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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
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    4. 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.
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    6. Weimann, Joachim, 1994. "Individual behaviour in a free riding experiment," Journal of Public Economics, Elsevier, vol. 54(2), pages 185-200, June.
    7. 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.
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    11. Lensberg, T. & van der Heijden, E.C.M., 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.
    12. Ernst FEHR & Simon GÄCHTER & Georg KIRCHSTEIGER, 1994. "Reciprocal Fairness and Noncompensating Wage Differentials," Vienna Economics Papers vie9401, University of Vienna, Department of Economics.
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    Cited by:

    1. Charness, Gary & Corominas-Bosch, Margarida & Frechette, Guillaume R., 2007. "Bargaining and network structure: An experiment," Journal of Economic Theory, Elsevier, vol. 136(1), pages 28-65, September.

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    More about this item

    Keywords

    experiments; exchange; partners; role assignment;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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