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An experiment on a core controversy

Listed author(s):
  • Yan, Huibin
  • Friedman, Daniel
  • Munro, David

A longstanding criticism of the core is that it is too sensitive to small changes in player numbers, as in a well known example where one extra seller (resp. buyer) causes the entire surplus to go to the buyer's (seller's) side. We test this example in the lab, using several different trading institutions. We find that successful collusion is relatively infrequent and decreasing over time even with institutions that facilitate collusion and, consistent with core theory, a disproportionate share of the surplus typically goes to the less numerous side. Our study also illuminates the boundaries of competitive equilibrium.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899825616000336
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 96 (2016)
Issue (Month): C ()
Pages: 132-144

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Handle: RePEc:eee:gamebe:v:96:y:2016:i:c:p:132-144
DOI: 10.1016/j.geb.2016.01.014
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  2. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
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  7. Friedman, Daniel & Ostroy, Joseph, 1995. "Competitivity in Auction Markets: An Experimental and Theoretical Investigation," Economic Journal, Royal Economic Society, vol. 105(428), pages 22-53, January.
  8. Isaac, R. Mark & Ramey, Valerie & Williams, Arlington W., 1984. "The effects of market organization on conspiracies in restraint of trade," Journal of Economic Behavior & Organization, Elsevier, vol. 5(2), pages 191-222, June.
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