Market games as social dilemmas
Iván Barreda-Tarrazona (),
Aurora García-Gallego (),
Nikolaos Georgantzís () and
University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics
We study an experimental exchange market based on Shapley and Shubik (1977). Two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange in the market. We implement a case in which the Nash equilibrium involves minimum exchange or no trade at all. This is almost never confirmed by our laboratory data. On the contrary, after a sufficiently large number of periods, convergence close to full trade is obtained, which can be supported as an epsilon symmetric strategy evolutionary stable equilibrium. We also study cheap talk communication within pairs of traders from the same (horizontal) and opposite (vertical) sides of the market. As predicted by the theory, horizontal communication restricts trade, whereas vertical communication leads to higher bids, but always lower or equal than those achieved tacitly by learning alone. Vertical messages limit the collusive effect of horizontal communication when the former precede the latter. Results do not differ when players are allowed to choose the communication mode.
Keywords: Efficiency; strategic market games; experiments; vertical communication; horizontal communication (search for similar items in EconPapers)
Pages: 37 pages
New Economics Papers: this item is included in nep-exp, nep-gth and nep-hpe
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Journal Article: Market games as social dilemmas (2018)
Working Paper: Market games as social dilemmas (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:07-2015
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