Let the Market Decide: An Experimental Study of Competition and Fairness

Björn Bartling, Manuel Grieder and Christian Zehnder

No 4831, CESifo Working Paper Series from CESifo

Abstract: Is competition perceived as a fair procedure? We report data from laboratory experiments where a powerful buyer can trade with one of several sellers. Sellers who feel shortchanged can engage in counterproductive behavior to punish the buyer. We find that the same unfavorable terms of trade trigger significantly less punishment if the buyer uses a competitive auction to determine the terms of trade than if she uses her authority to dictate the same terms directly. Our results inform the debate on the fairness of market outcomes by showing that the use of a competitive procedure can, by itself, affect how people judge unequal distributive outcomes.

Keywords: competition; authority; markets; fairness; responsibility; procedures (search for similar items in EconPapers)
JEL-codes: C91 D03 D63 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4831

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