Skills in the marketplace: Market efficiency, social orientation, and ability in a field-based experiment

Nathan Fiala

Journal of Economic Behavior & Organization, 2015, vol. 120, issue C, 174-188

Abstract: Neoclassical economic theory predicts that markets will clear, leaving little or no marginal gains from trade. Laboratory experiments have largely confirmed this prediction, though the results of recent field experiments have been mixed, especially in developing countries. I create a multiround trading market in Uganda to explore the efficiency of trading and test whether traders’ personal traits are associated with market efficiency and individual bargaining success. To test the effects of individual traits, I utilize data on measures of the traders’ human and physical capital, risk and time preferences, and social orientation, specifically pro- and antisocial behavior and aggression. I find that the buyers’ and sellers’ relative levels of social orientation and human capital are associated with levels of market efficiency within rounds. Measures of social orientation, however, are less associated with individual success. I also find that rents obtained in the experiment are strongly associated with the wealth levels of participants two years later, but this association is limited to those who were randomly assigned to be buyers in the experiment. I present evidence that this association is driven by greater buyer bargaining ability.

Keywords: Experimental market; Market interactions; Market efficiency; Developing markets; Social orientation; Individual ability (search for similar items in EconPapers)
JEL-codes: C91 D14 J24 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:120:y:2015:i:c:p:174-188

DOI: 10.1016/j.jebo.2015.10.008

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