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Competition on Common Value Markets with Naive Traders - A Theoretical and Experimental Analysis

Author

Listed:
  • Nadine Chlaß

    (Max Planck Institute of Economics, Jena, Germany)

  • Werner Güth

    (Max Planck Institute of Economics, Jena, Germany.)

Abstract

Theoretically and experimentally, we generalize the analysis of acquiring a company (Samuelson and Bazerman 1985) by allowing for competition of both, buyers and sellers. Naivety of both is related to the idea that higher prices exclude worse qualities. While competition of naive buyers increases prices, competition of naive sellers promotes effciency enhancing trade. Our predictions are tested experimentally.

Suggested Citation

  • Nadine Chlaß & Werner Güth, 2007. "Competition on Common Value Markets with Naive Traders - A Theoretical and Experimental Analysis," Jena Economics Research Papers 2007-105, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2007-105
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2007/wp_2007_105.pdf
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    More about this item

    Keywords

    incomplete information; common value auction; experiment;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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