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

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  • Eline van der Heijden
  • Jan H.M. Nelissen
  • Harrie A.A. Verbon

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.

Suggested Citation

  • Eline van der Heijden & Jan H.M. Nelissen & Harrie A.A. Verbon, 2002. "Should the Same Side of the Market Always Move First in a Transaction?. An Experimental Study," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(2), pages 344-344, June.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200206)158:2_344:stssot_2.0.tx_2-k
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    References listed on IDEAS

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    1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    2. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 437-459.
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    4. Guth, Werner & Huck, Steffen & Rapoport, Amnon, 1998. "The limitations of the positional order effect: Can it support silent threats and non-equilibrium behavior?," Journal of Economic Behavior & Organization, Elsevier, vol. 34(2), pages 313-325, February.
    5. Weimann, Joachim, 1994. "Individual behaviour in a free riding experiment," Journal of Public Economics, Elsevier, vol. 54(2), pages 185-200, June.
    6. 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.
    7. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October.
    8. Forsythe, Robert & Lundholm, Russell & Rietz, Thomas, 1999. "Cheap Talk, Fraud, and Adverse Selection in Financial Markets: Some Experimental Evidence," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 481-518.
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    10. 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.

    More about this item

    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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