Do market conditions affect preferences? Evidence from experimental markets with excess supply and excess demand

Jordi Brandts and Gary Charness

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study whether people's preferences in an unbalanced market are affected by whether they are on the excess supply side or the excess demand side of the market. Our analysis is based on the comparison of behavior between two types of experimental gift exchange markets, which vary only with respect to whether first or second movers are on the long side of the market. The direction of market imbalance could influence subjects' motivation, as second movers, workers, might react differently to favorable actions by first movers, firms, in the two cases. Our data show strong deviations from the standard game-theoretic prediction. However, we only find secondary treatment effects. First movers are not more generous when they are in excess supply and second movers do not respond less favorably when they are in excess demand. Competition has only minor psychological effects in our data.

Keywords: Experiment; unbalanced markets; cooperation; gift--exchange; Leex (search for similar items in EconPapers)
JEL-codes: A13 C91 C92 D43 J41 (search for similar items in EconPapers)
Date: 2000-06
New Economics Papers: this item is included in nep-exp and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:491

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