Markets Versus Negotiations: An Experimental Investigation

Tamar Kugler (), Zvika Neeman () and Nir Vulkan ()

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: We consider the consequences of competition between two types of experimental exchange mechanisms, a “decentralized bargaining” market, and a “centralized” market. The experiment demonstrates that decentralized bargaining is subject to a process of unraveling in which relatively weak traders (buyers with high willingness to pay and sellers with low costs) continuously find trading in the centralized market more attractive until almost no opportunities for mutually beneficial trade remain outside the centralized marketplace.

Keywords: centralized markets; decentralized markets; decentralized bargaining; market design; market formation (search for similar items in EconPapers)
JEL-codes: C78 D40 L10 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2003-06
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Economic Behavior, 2006, vol. 56, pp. 121-134.

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