Market Culture: How Rules Governing Exploding Offers Affect Market Performance

Abstract

Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted, and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. (JEL C91, D40, D81)

Kidney exchange in dynamic sparse heterogenous pools

“…Kidney exchange clearinghouses can create a thick market at the cost of waiting for many pairs to arrive. Tradeoffs between unraveling (waiting before entering the market) and thickness are of practical importance in many other markets such as job markets and markets for graduate students (see e.g., Neiderle and Roth [2009]). Our theory can serve as a building block for studying such tradeoffs and for the study of implementing "efficient" outcomes in the long run when agents have preferences.…”

Pathology subspecialty fellowship application reform 2007 to 2010

“…In the first instance, the Economists Muriel Niederle (Stanford University) and Alvin E. Roth (Harvard University) have applied their skills to the Gastroenterology Fellowship market, which established an NRMP-administered Match in the mid 1990s that originally failed due to erosion of participation, but was reinstituted in 2006 with sustained success. The principles of our current Pathology/ Laboratory Medicine market are well demonstrated in their reports of Niederle and Roth [25][26][27][28], as now summarized. Definitions are given in Table 12.…”

Marketplaces, Markets, and Market Design

“…But there is something about the market culture in economics that seems to have restrained the extremely short "exploding" offers seen in some markets, including some contemporary markets discussed shortly (cf. Niederle and Roth 2009). Sometimes important rules of market behavior are unwritten (and sometimes written rules are not followed) so understanding how marketplaces work may require careful attention to observed behavior, to detect social norms and customs that may shape available strategies.…”