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Markets Versus Negotiations: An Experimental Investigation

  • Tamar Kugler

    ()

  • Zvika Neeman

    ()

  • Nir Vulkan

    ()

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://ratio.huji.ac.il/sites/default/files/publications/dp319.pdf
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Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp319.

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Length: 19 pages
Date of creation: Jun 2003
Date of revision:
Publication status: Published in Economic Behavior, 2006, vol. 56, pp. 121-134.
Handle: RePEc:huj:dispap:dp319
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  1. 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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  4. 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.
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  11. Fudenberg, Drew & Ellison, Glenn, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," Scholarly Articles 3160493, Harvard University Department of Economics.
  12. 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.
  13. 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.
  14. Nir Vulkan, 2003. "Introduction to The Economics of E-Commerce: A Strategic Guide to Understanding and Designing the Online Marketplace
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  15. Peters Michael, 1994. "Equilibrium Mechanisms in a Decentralized Market," Journal of Economic Theory, Elsevier, vol. 64(2), pages 390-423, December.
  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. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  18. Plott, Charles R. & Smith, Vernon L., . "An Experimental Examination of Two Exchange Institutions," Working Papers 83, California Institute of Technology, Division of the Humanities and Social Sciences.
  19. 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.
  20. 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.
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