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Market games as social dilemmas

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  • Barreda-Tarrazona, Iván
  • García-Gallego, Aurora
  • Georgantzís, Nikolaos
  • Ziros, Nicholas

Abstract

In an experimental exchange market based on Shapley and Shubik (1977), two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange. In this context, although the Nash equilibria of the game involve zero or minimum trade, we obtain intense trade close to levels that maximize social welfare. Going a step forward, we implement communication within pairs of traders from the same (horizontal) and opposite (vertical) sides of the market. Overall, we find that horizontal communication tends to reduce bids whereas vertical communication has no effect.

Suggested Citation

  • Barreda-Tarrazona, Iván & García-Gallego, Aurora & Georgantzís, Nikolaos & Ziros, Nicholas, 2018. "Market games as social dilemmas," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 435-444.
    • Handle: RePEc:eee:jeborg:v:155:y:2018:i:c:p:435-444
    DOI: 10.1016/j.jebo.2018.09.015
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    Keywords

    Efficiency; Strategic market games; Experiments; Vertical communication; Horizontal communication;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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