Price Rigidity in an Experimental Market

Korth, Christian

doi:10.1007/978-3-642-02253-1_7

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2018

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“…The first incentivized study of fairness in markets was that of Kachelmeier et al (1991a), though other strands of the literature focus on fairness in other settings such as bargaining (see, for example, the discussion of ultimatum-game results in Roth's 1995 survey of bargaining experiments), and the strands do overlap somewhat (see Korth 2009 for an investigation of fairness in a market setting built upon the ultimatum game). Kachelmeier et al considered 5-buyer-5-seller induced-value markets with buyers posting bids via networked computers.…”

Section: Relevant Literaturementioning

confidence: 99%

Pricing in Competitive Search Markets: The Roles of Price Information and Fairness Perceptions

Anbarcı

Feltovich

2018

Management Science

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We use a competitive search (price-posting) framework to experimentally examine how buyer information and fairness perceptions affect market behavior. We observe that moving from 0 to 1 uninformed buyers leads to higher prices in both 2(seller)x2(buyer) and 2x3 markets: the former as predicted under standard preferences, the latter the opposite of the theoretical prediction. Perceptions of fair priceselicited in the experiment-are a powerful driver of behavior. For buyers, fair prices correlate with priceresponsiveness, which varies systematically across treatments and impacts sellers' pricing incentives. For sellers, fair prices correlate with underpricing , which also varies systematically across treatments.

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Section: Relevant Literaturementioning

confidence: 99%