IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/15420.html
   My bibliography  Save this paper

The Economics of Open Air Markets

Author

Listed:
  • John A. List

Abstract

Despite their current prevalence and historical significance, little is known about the economics of open air markets. This paper uses open air markets as a natural laboratory to provide initial insights into the underlying operation of such markets. Using data on thousands of individual transactions gathered from May 2005- August 2008, I report several insights. First, the natural pricing and allocation mechanism in open air markets is capable of approaching full efficiency, even in quite austere conditions. Yet, a second result highlights the fragility of this finding: allowance of explicit seller communication frustrates market efficiency in a broad array of situations. Making use of insights gained from a "mole" in the marketplace, a third set of results revolves around economic questions pertaining to collusive arrangements that are otherwise quite difficult to investigate. Overall, I find data patterns that are consistent with certain theoretical predictions, as the evidence suggests that i) cheating rates increase as the coalition is expanded, ii) sellers cheat less when they have collusive arrangements in several spatially differentiated markets, and iii) sellers cheat more when they are experiencing periods of abnormally high profits. These results follow from a combination of insights gained from building a bridge between the lab and the naturally-occurring environment. By doing so, the study showcases that in developing a deeper understanding of economic science, it is desirable to take advantage of the myriad settings in which economic phenomena present themselves.

Suggested Citation

  • John A. List, 2009. "The Economics of Open Air Markets," NBER Working Papers 15420, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15420 Note: IO PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w15420.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. repec:feb:framed:0081 is not listed on IDEAS
    2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    3. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
    4. John A. List, 2006. "The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 1-37, February.
    5. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    6. John A. List, 2004. "Testing Neoclassical Competitive Theory in Multilateral Decentralized Markets," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1131-1156, October.
    7. P. A. Riach & J. Rich, 2002. "Field Experiments of Discrimination in the Market Place," Economic Journal, Royal Economic Society, vol. 112(483), pages 480-518, November.
    8. Schmalensee, Richard, 1987. "Collusion versus Differential Efficiency: Testing Alternative Hypotheses," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 399-425, June.
    9. Cason, Timothy N & Mason, Charles F, 1999. "Information Sharing and Tacit Collusion in Laboratory Duopoly Markets," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 258-281, April.
    10. John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring.
    11. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322-322.
    12. Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
    13. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    14. Davis, Douglas D & Holt, Charles A, 1998. "Conspiracies and Secret Discounts in Laboratory Markets," Economic Journal, Royal Economic Society, vol. 108(448), pages 736-756, May.
    15. repec:ebl:ecbull:v:3:y:2002:i:6:p:1-11 is not listed on IDEAS
    16. Gallet, Craig A. & Schroeter, John R., 1995. "The Effects of the Business Cycle on Oligopoly Coordination: Evidence from the U.S. Rayon Industry," Staff General Research Papers Archive 5250, Iowa State University, Department of Economics.
    17. Douglas D. Davis, 2002. "Collusion in Procurement Auctions: an Experimental Examination," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 213-230, April.
    18. Holcomb, James H. & Nelson, Paul S., 1997. "The role of monitoring in duopoly market outcomes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 26(1), pages 79-93.
    19. Geertz, Clifford, 1978. "The Bazaar Economy: Information and Search in Peasant Marketing," American Economic Review, American Economic Association, vol. 68(2), pages 28-32, May.
    20. Sherry, John F, Jr, 1990. " A Sociocultural Analysis of a Midwestern American Flea Market," Journal of Consumer Research, Oxford University Press, vol. 17(1), pages 13-30, June.
    21. Isaac, R. Mark & Ramey, Valerie & Williams, Arlington W., 1984. "The effects of market organization on conspiracies in restraint of trade," Journal of Economic Behavior & Organization, Elsevier, vol. 5(2), pages 191-222, June.
    22. Robert Feinberg & Christopher Snyder, 2002. "Collusion with secret price cuts: an experimental investigation," Economics Bulletin, AccessEcon, vol. 3(6), pages 1-11.
    23. Uri Gneezy & John A List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," Econometrica, Econometric Society, vol. 74(5), pages 1365-1384, September.
    24. John A. List & Robert P. Berrens & Alok K. Bohara & Joe Kerkvliet, 2004. "Examining the Role of Social Isolation on Stated Preferences," American Economic Review, American Economic Association, vol. 94(3), pages 741-752, June.
    25. George Symeonidis, 2002. "The Effects of Competition: Cartel Policy and the Evolution of Strategy and Structure in British Industry," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262194686, January.
    26. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    27. Connor, John M., 2005. "Price-Fixing Overcharges: Legal And Economic Evidence," 2005 Annual meeting, July 24-27, Providence, RI 19254, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    28. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
    29. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhixin Dai & Fabio Galeotti & Marie Claire Villeval, 2016. "Cheating in the Lab Predicts Fraud in the Field An Experiment in Public Transportations," Working Papers halshs-01265696, HAL.
    2. Chen, Yefeng & Jiang, Shuguang & Villeval, Marie Claire, 2016. "The Tragedy of Corruption," IZA Discussion Papers 10175, Institute for the Study of Labor (IZA).
    3. Omar Al-Ubaydli & John A. List, 2013. "On the Generalizability of Experimental Results in Economics: With a Response to Commentors," CESifo Working Paper Series 4543, CESifo Group Munich.
    4. Bradley J. Ruffle, 2013. "When Do Large Buyers Pay Less? Experimental Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 108-137, March.
    5. Gudehus Timm, 2010. "Logik des Marktes Marktordnung, Marktverhalten und Marktergebnisse / Logic of Markets Market Rules, Behaviour of Actors, and Market Outcome," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(5), pages 601-629, October.
    6. Vázquez-Maguirre, Mario & Hartmann, Andreas M., 2013. "Nonmarket strategies of media enterprises in the Mexican television industry," Journal of Business Research, Elsevier, vol. 66(10), pages 1743-1749.

    More about this item

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • L4 - Industrial Organization - - Antitrust Issues and Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:15420. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.