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Should the Same Side of the Market Always Move First in a Transaction? An Experimental Study

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  • van der Heijden, E.C.M.

    (Tilburg University, Center For Economic Research)

  • Nelissen, J.H.M.

    (Tilburg University, Center For Economic Research)

  • Verbon, H.A.A.

    (Tilburg University, Center For Economic Research)

Abstract

We investigate whether transactions where the buyer (or seller) always moves first and the seller (or buyer) always moves second in the exchange give higher payoffs than transactions in which it is randomly determined who moves first. We examine the effect of two treatment variables: partners versus strangers, and fixed versus changing positions. We find that both with fixed and with changing positions, second movers take advantage of their position by exploiting the first mover. But with fixed positions, exploitation occurs significantly less, while reciprocal exchanges happen more often. However, fixed positions result in very unevenly distributed payoffs.
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  • van der Heijden, E.C.M. & Nelissen, J.H.M. & Verbon, H.A.A., 2000. "Should the Same Side of the Market Always Move First in a Transaction? An Experimental Study," Discussion Paper 2000-103, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:bbc28807-9973-4a24-8aa5-32b634815dbf
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    References listed on IDEAS

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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

    microeconomics;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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