IDEAS home Printed from https://ideas.repec.org/p/esi/discus/2006-36.html
   My bibliography  Save this paper

Social Learning of Efficiency Enhancing Trade With(out) Market Entry Costs - An experimental study

Author

Listed:
  • Nadine Chlaß
  • Werner Güth
  • Christoph Vanberg

Abstract

We investigate experimentally whether entry costs have an impact on the evolution of cooperation in a social dilemma game. In particular, subjects repeatedly play the so-called takeover game with anonymous partners randomly drawn from a fixed population of participants. The game represents a social dilemma because selfishly rational players can fail to make efficient trades due to information asymmetries. In order to create a potential for social learning, we provide subjects with feedback about average results in the population. Our interest lies in observing the extent to which cooperative behaviors facilitating trade are adopted. Our main conjecture is that market entry costs inspire more trade. This is only partly confirmed by the data.

Suggested Citation

  • Nadine Chlaß & Werner Güth & Christoph Vanberg, 2007. "Social Learning of Efficiency Enhancing Trade With(out) Market Entry Costs - An experimental study," Papers on Strategic Interaction 2006-36, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2006-36
    as

    Download full text from publisher

    File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2006-36.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Van Huyck John B. & Battalio Raymond C. & Beil Richard O., 1993. "Asset Markets as an Equilibrium Selection Mechanism: Coordination Failure, Game Form Auctions, and Tacit Communication," Games and Economic Behavior, Elsevier, vol. 5(3), pages 485-504, July.
    2. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-1037, September.
    5. Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991. "An evaluation of learning in the bilateral winner's curse," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 1-22, February.
    6. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    7. Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winner’s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
    8. Gérard P. Cachon & Colin F. Camerer, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 165-194.
    9. John B. Van Huyck & Raymond C. Battalio & Richard O. Beil, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 885-910.
    10. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ellen Garbarino & Robert Slonim, 2007. "Preferences and decision errors in the winner’s curse," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 241-257, June.
    2. Francesco Feri & Bernd Irlenbusch & Matthias Sutter, 2010. "Efficiency Gains from Team-Based Coordination—Large-Scale Experimental Evidence," American Economic Review, American Economic Association, vol. 100(4), pages 1892-1912, September.
    3. Fehr, Dietmar, 2011. "The persistance of "bad" precedents and the need for communication: A coordination experiment," SFB 649 Discussion Papers 2011-039, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    4. repec:hum:wpaper:sfb649dp2011-039 is not listed on IDEAS
    5. Christopher Roby, 2021. "Can loss framing improve coordination in the minimum effort game?," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(3), pages 557-588, July.
    6. Antonio J. Morales & Javier Rodero-Cosano, 2023. "Forward induction and market entry with an endogenous outside option," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(2), pages 365-383, August.
    7. Bruno Broseta & Enrique Fatas & Tibor Neugebauer, 2003. "Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 574-591, October.
    8. Giovanna Devetag & Andreas Ortmann, 2007. "When and why? A critical survey on coordination failure in the laboratory," Experimental Economics, Springer;Economic Science Association, vol. 10(3), pages 331-344, September.
    9. Siegfried K. Berninghaus & Lora Todorova & Bodo Vogt, 2011. "A Simple Questionnaire Can Change Everything - Are Strategy Choices in Coordination Games Stable?," Jena Economics Research Papers 2011-057, Friedrich-Schiller-University Jena.
    10. Nicolas Jacquemet & Stéphane Luchini & Jason F. Shogren & Adam Zylbersztejn, 2018. "Coordination with communication under oath," Experimental Economics, Springer;Economic Science Association, vol. 21(3), pages 627-649, September.
    11. Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra K. Zaby, 2019. "Compulsory Disclosure of Private Information: Theoretical and Experimental Results for the Acquiring-a-Company Game," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(3), pages 502-523.
    12. Fehr, Dietmar, 2017. "Costly communication and learning from failure in organizational coordination," European Economic Review, Elsevier, vol. 93(C), pages 106-122.
    13. Anke Gerbery & Thorsten Hensz & Bodo Vogtx, 2010. "Rational Investor Sentimentina Repeated Stochastic Game with Imperfect Monitoring," Post-Print hal-00911824, HAL.
    14. Blume, Andreas & Gneezy, Uri, 2010. "Cognitive forward induction and coordination without common knowledge: An experimental study," Games and Economic Behavior, Elsevier, vol. 68(2), pages 488-511, March.
    15. Gary Charness & Dan Levin, 2009. "The Origin of the Winner's Curse: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 207-236, February.
    16. Keser, Claudia & Ehrhart, Karl-Martin & Berninghaus, Siegfried K., 1998. "Coordination and local interaction: experimental evidence," Economics Letters, Elsevier, vol. 58(3), pages 269-275, March.
    17. repec:zbw:bonedp:bgse10_2001 is not listed on IDEAS
    18. Amnon Rapoport & Darryl A. Seale & Ido Erev & James A. Sundali, 1998. "Equilibrium Play in Large Group Market Entry Games," Management Science, INFORMS, vol. 44(1), pages 119-141, January.
    19. Çule, Monika & Fulton, Murray, 2009. "Business culture and tax evasion: Why corruption and the unofficial economy can persist," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 811-822, December.
    20. Banerjee, Simanti & Cason, Timothy N. & de Vries, Frans P. & Hanley, Nick, 2017. "Transaction costs, communication and spatial coordination in Payment for Ecosystem Services Schemes," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 68-89.
    21. Bohnet, Iris & Cooter, Robert, 2001. "Expressive Law: Framing or Equilibrium Selection?," Berkeley Olin Program in Law & Economics, Working Paper Series qt5h6970h8, Berkeley Olin Program in Law & Economics.
    22. Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2018. "Punishing liars—How monitoring affects honesty and trust," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-30, October.

    More about this item

    Keywords

    Cooperation; sunk costs; social learning; takeover game;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esi:discus:2006-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Karin Richter (email available below). General contact details of provider: https://edirc.repec.org/data/mpiewde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.