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Experimental Evidence on the Behavioral (In)Efficiency of Search-and-Matching Market Institutions

Author

Listed:
  • Kenneth Chan
  • Samuel Fahim

Abstract

We design a lab experiment to study three different search-and-matching market institutions: (1) price posting with directed search, (2) bargaining with directed search, and (3) bargaining with a guaranteed match. We compare their performance in terms of market efficiency, prices of goods, and subjects’ preferences across different market institutions. We find that the price-posting market with directed search is the most efficient, has the lowest prices (a more equitable split of surpluses), and is the most preferred market institution among our experimental subjects.

Suggested Citation

  • Kenneth Chan & Samuel Fahim, 2026. "Experimental Evidence on the Behavioral (In)Efficiency of Search-and-Matching Market Institutions," Berlin School of Economics Discussion Papers 0105, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0105
    DOI: 10.48462/opus4-6304
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    References listed on IDEAS

    as
    1. Ken Binmore & Avner Shared & John Sutton, 1989. "An Outside Option Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 753-770.
    2. Nejat Anbarci & Nick Feltovich, 2013. "How sensitive are bargaining outcomes to changes in disagreement payoffs?," Experimental Economics, Springer;Economic Science Association, vol. 16(4), pages 560-596, December.
    3. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
    4. Andrew Kloosterman, 2016. "Directed search with heterogeneous firms: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 51-66, March.
    5. Kalai, Ehud, 1977. "Proportional Solutions to Bargaining Situations: Interpersonal Utility Comparisons," Econometrica, Econometric Society, vol. 45(7), pages 1623-1630, October.
    6. Andrew Kloosterman, 2016. "Directed search with heterogeneous firms: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 51-66, March.
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    Keywords

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    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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