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Market games as social dilemmas

Listed author(s):
  • Iván Barreda Tarrazona

    ()

    (LEE & Economics Department, Universitat Jaume I, Castellón, Spain)

  • Aurora García-Gallego

    ()

    (LEE & Economics Department, Universitat Jaume I, Castellón, Spain)

  • Nikolaos Georgantzis

    ()

    (UJI-LEE, Spain and Agriculture Policy and Development, University of Reading, UK)

  • Nikolas Ziros

    ()

    (Department of Economics, University of Cyprus, Cyprus)

We study 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 the market. We implement a case in which the Nash equilibrium involves minimum exchange or no trade at all. This is almost never confirmed b y our laboratory data. On the contrary, after a sufficiently large number of periods, convergence close to full trade is obtained, which can be supported as an epsilon symmetric strategy evolutionary stable equilibrium. We also study cheap talk communication within pairs of traders from the same (horizontal) and opposite (vertical) sides of the market. As predicted by the theory, horizontal communication restricts trade, whereas vertical communication leads to higher bids, but always lower or equal than those achieved tacitly by learning alone. Vertical messages limit the collusive effect of horizontal communication when the former precede the latter. Results do not differ when players are allowed to choose the communication mode.

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Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2015/10.

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Length: 39 pages
Date of creation: 2015
Handle: RePEc:jau:wpaper:2015/10
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