Fairness and short run price adjustment in posted offer markets
Vernon Smith and
Praveen Kujal ()
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
Questionnaire studies show that perceptions of fairness cause people to resist price increases following abrupt changes in conditions with no cost justification. We examine this hypothesis in posted-offer markets extending previous work. Consistent with the hypothesis, in the profit disclosure (fairness) treatment prices are initially below those in the cost and the no disclosure treatments. Over time prices converge in all treatments to the competitive surplus maximizing equilibrium. Fairness is thus interpreted as being a result of expectations that are not sustainable. Expectations adapt as the market converges to the predicted competitive equilibrium.
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Chapter: Fairness and Short Run Price Adjustment in Posted Offer Markets (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we036024
Access Statistics for this paper
More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
Bibliographic data for series maintained by Ana Poveda ().