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Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay

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  • Gary E Bolton
  • Axel Ockenfels

Abstract

We conducted a framed field experiment on eBay, and examined to what extent both social and competitive laboratory behavior are robust to institutionally complex real world markets with experienced traders, who selected themselves into these markets. For buyers, the data strongly confirm the dichotomy between equitable bargaining and competitive bidding predicted by social preference equilibrium and suggested by lab evidence. Importantly, reputation building on eBay cannot explain the social behavior. We also observe that the behavioral patterns in the field experiment mirror fully naturally occurring trading patterns in the market. In particular, some sellers fail to use their commitment power as predicted by theories of both selfish and social behavior, with the pattern of deviation reflecting traders’ market experience outside the experiment. These patterns further amplify the dichotomy between bilateral and competitive bidding.

Suggested Citation

  • Gary E Bolton & Axel Ockenfels, 2007. "Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay," Working Paper Series in Economics 36, University of Cologne, Department of Economics, revised 24 Feb 2011.
    • Handle: RePEc:kls:series:0036
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    Cited by:

    1. Axel Ockenfels, 2009. "Marktdesign und Experimentelle Wirtschaftsforschung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(s1), pages 31-53, May.
    2. Jonas Schmidt & Tammo H. A. Bijmolt, 2020. "Accurately measuring willingness to pay for consumer goods: a meta-analysis of the hypothetical bias," Journal of the Academy of Marketing Science, Springer, vol. 48(3), pages 499-518, May.
    3. Gary Bolton & Ben Greiner & Axel Ockenfels, 2013. "Engineering Trust: Reciprocity in the Production of Reputation Information," Management Science, INFORMS, vol. 59(2), pages 265-285, January.
    4. Shchetinin, Oleg, 2009. "Contracting Under Reciprocal Altruism," MPRA Paper 13457, University Library of Munich, Germany.
    5. Haghani, Milad & Sarvi, Majid, 2018. "Hypothetical bias and decision-rule effect in modelling discrete directional choices," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 361-388.
    6. Gizatulina, Alia & Gorelkina, Olga, 2021. "Selling “Money” on eBay: A field study of surplus division," Journal of Economic Behavior & Organization, Elsevier, vol. 181(C), pages 19-38.
    7. Jannett Highfill & Kevin M. O’Brien, 2018. "eBay Memorabilia Auctions vis-à -vis Predictions for the 2016 U.S. Presidential Election," The American Economist, Sage Publications, vol. 63(1), pages 71-78, March.
    8. Yan Chen & Peter Cramton & John A. List & Axel Ockenfels, 2021. "Market Design, Human Behavior, and Management," Management Science, INFORMS, vol. 67(9), pages 5317-5348, September.
    9. Grebe, Tim & Ivanova-Stenzel, Radosveta & Kröger, Sabine, 2021. "How do sellers benefit from Buy-It-Now prices in eBay auctions?," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 189-205.
    10. Takács, Károly, 2010. "Hálózati kísérletek [Network experiments]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 958-979.
    11. van Damme, Eric & Binmore, Kenneth G. & Roth, Alvin E. & Samuelson, Larry & Winter, Eyal & Bolton, Gary E. & Ockenfels, Axel & Dufwenberg, Martin & Kirchsteiger, Georg & Gneezy, Uri & Kocher, Martin G, 2014. "How Werner Güth's ultimatum game shaped our understanding of social behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 292-318.
    12. Ivanova-Stenzel, Radosveta & Grebe, Tim & Kröger, Sabine, 2019. "How do sellers benefit from Buy-It-Now prices in eBay auctions?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203606, Verein für Socialpolitik / German Economic Association.

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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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