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Markets versus negotiations: An experimental investigation

  • Kugler, Tamar
  • Neeman, Zvika
  • Vulkan, Nir

We consider the consequences of competition between two types of experimental exchange mechanisms, a “decentralized bargaining” market, and a “centralized” market. The experiment demonstrates that decentralized bargaining is subject to a process of unraveling in which relatively weak traders (buyers with high willingness to pay and sellers with low costs) continuously find trading in the centralized market more attractive until almost no opportunities for mutually beneficial trade remain outside the centralized marketplace.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899-8256(05)00076-X
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 56 (2006)
Issue (Month): 1 (July)
Pages: 121-134

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Handle: RePEc:eee:gamebe:v:56:y:2006:i:1:p:121-134
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Florian Zettelmeyer & Fiona M. Scott Morton & Jorge Silva-Risso, 2001. "Cowboys or Cowards: Why are Internet Car Prices Lower?," Yale School of Management Working Papers ysm241, Yale School of Management.
  2. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Consumer Information and Price Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?," NBER Working Papers 8668, National Bureau of Economic Research, Inc.
  3. Glenn Allison & Drew Fudenberg, 2002. "Competing Auctions," Harvard Institute of Economic Research Working Papers 1960, Harvard - Institute of Economic Research.
  4. Cason, Timothy N. & Friedman, Daniel & Milam, Garrett H., 2003. "Bargaining versus posted price competition in customer markets," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 223-251, February.
  5. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  6. Fudenberg, Drew & Ellison, Glenn, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," Scholarly Articles 3160493, Harvard University Department of Economics.
  7. Campbell, Joseph, et al, 1991. "Off-Floor Trading, Disintegration, and the Bid-Ask Spread in Experimental Markets," The Journal of Business, University of Chicago Press, vol. 64(4), pages 495-522, October.
  8. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  9. Florian Zettelmeyer & Fiona M. Scott Morton & Jorge Silva-Risso, 2001. "Consumer Information and Price Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?," Yale School of Management Working Papers ysm240, Yale School of Management.
  10. Charles R. Plott & Vernon L. Smith, 1978. "An Experimental Examination of Two Exchange Institutions," Review of Economic Studies, Oxford University Press, vol. 45(1), pages 133-153.
  11. Brown, Martin & Falk, Armin & Fehr, Ernst, 2003. "Relational Contracts and the Nature of Market Interactions," IZA Discussion Papers 897, Institute for the Study of Labor (IZA).
  12. Peters Michael, 1994. "Equilibrium Mechanisms in a Decentralized Market," Journal of Economic Theory, Elsevier, vol. 64(2), pages 390-423, December.
  13. Rich, Changhua Sun & Friedman, Daniel, 1998. "The Matching Market Institution: A Laboratory Investigation," American Economic Review, American Economic Association, vol. 88(5), pages 1311-22, December.
  14. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Internet Car Retailing," NBER Chapters, in: E-commerce, pages 501-519 National Bureau of Economic Research, Inc.
  15. Fiona Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2003. "Consumer Information and Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 65-92, March.
  16. Kirchsteiger, G. & Niederle, M. & Potters, J.J.M., 2001. "Public Versus Private Exchanges," Discussion Paper 2001-101, Tilburg University, Center for Economic Research.
  17. Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 501-19, December.
  18. Nir Vulkan, 2003. "Introduction to The Economics of E-Commerce: A Strategic Guide to Understanding and Designing the Online Marketplace," Introductory Chapters, in: The Economics of E-Commerce: A Strategic Guide to Understanding and Designing the Online Marketplace Princeton University Press.
  19. Jon Ketcham & Vernon L. Smith & Arlington W. Williams, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Oxford University Press, vol. 51(4), pages 595-614.
  20. Florian Zettelmeyer & Fiona Scott Morton & Jorge Silva-Risso, 2001. "Cowboys or Cowards: Why are Internet Car Prices Lower?," NBER Working Papers 8667, National Bureau of Economic Research, Inc.
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