IDEAS home Printed from https://ideas.repec.org/p/unm/umagsb/2016006.html
   My bibliography  Save this paper

Market competition and efficient cooperation

Author

Listed:
  • Brandts, J.
  • Riedl, A.M.

    (Microeconomics & Public Economics)

Abstract

We use laboratory experiments to study the causal effects of favorable and unfavorable competitive market experience on cooperation in a subsequent social dilemma game. The issues we study are part of the broader topic of whether there are behavioral spillovers between different spheres of social interactions. Market interaction takes place in a continuous double auction market in which one side of the market obtains the larger part of the surplus. We examine the efficiency of subsequent cooperation for pairs of market-winners, market-losers and mixed pairs and study both the cases where interaction in the social dilemma is with others from the same market, ‘market-partners’, and where it is with others from another market, ‘market-strangers’, and compare it with benchmark behavior in a stand-alone social dilemma game. We find that in market-partners, market experience has adverse effects on the efficiency of cooperation on both market-winner and market-loser pairs. In market-strangers, pairs of market-winners manage to cooperate more efficiently. These results indicate that it is not market experience per se that lowers the ability to cooperate. Rather, having competed for scarce resources on the same side of the market makes it difficult to overcome the social dilemma and positive market experience fosters cooperation only for those who did not have to compete with each other. We also show that differences in cooperation cannot be explained by ex-ante income differences and find that market experience also affects subjective well-being and social value orientation.

Suggested Citation

  • Brandts, J. & Riedl, A.M., 2016. "Market competition and efficient cooperation," Research Memorandum 006, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2016006
    DOI: 10.26481/umagsb.2016006
    as

    Download full text from publisher

    File URL: https://cris.maastrichtuniversity.nl/ws/files/1587217/guid-340c1b5c-b478-478c-a726-b39dbf1ca2fa-ASSET1.0.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.26481/umagsb.2016006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Joseph Henrich, 2001. "In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies," American Economic Review, American Economic Association, vol. 91(2), pages 73-78, May.
    2. Ernst Fehr & Karla Hoff, 2011. "Introduction: Tastes, Castes and Culture: the Influence of Society on Preferences," Economic Journal, Royal Economic Society, vol. 121(556), pages 396-412, November.
    3. Carpenter Jeffrey P & Seki Erika, 2005. "Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-25, December.
    4. Armin Falk & James J. Heckman, 2009. "Lab Experiments are a Major Source of Knowledge in the Social Sciences," Working Papers 200935, Geary Institute, University College Dublin.
    5. Bauernschuster, Stefan & Falck, Oliver & Große, Niels, 2013. "When trustors compete for the favour of a trustee – A laboratory experiment," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 133-147.
    6. Huck, Steffen & Lünser, Gabriele K. & Tyran, Jean-Robert, 2012. "Competition fosters trust," Games and Economic Behavior, Elsevier, vol. 76(1), pages 195-209.
    7. repec:cup:judgdm:v:6:y:2011:i:8:p:771-781 is not listed on IDEAS
    8. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, vol. 94(5), pages 1354-1378, December.
    9. Holt, Charles A & Langan, Loren W & Villamil, Anne P, 1986. "Market Power in Oral Double Auctions," Economic Inquiry, Western Economic Association International, vol. 24(1), pages 107-123, January.
    10. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    11. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    12. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
    13. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, vol. 95(1), pages 437-449, March.
    14. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    15. Ernst Fehr & Karla Hoff, 2011. "Tastes, castes, and culture: The influence of society on preferences," ECON - Working Papers 026, Department of Economics - University of Zurich.
    16. Vernon L. Smith, 1998. "The Two Faces of Adam Smith," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 2-19, July.
    17. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
    18. van Dijk, Frans & van Winden, Frans, 1997. "Dynamics of social ties and local public good provision," Journal of Public Economics, Elsevier, vol. 64(3), pages 323-341, June.
    19. Henrich, Joseph & Boyd, Robert & Bowles, Samuel & Camerer, Colin & Fehr, Ernst & Gintis, Herbert (ed.), 2004. "Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies," OUP Catalogue, Oxford University Press, number 9780199262052.
    20. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70(2), pages 111-111.
    21. Björn Bartling & Roberto A. Weber & Lan Yao, 2015. "Do Markets Erode Social Responsibility?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 219-266.
    22. Holger Herz & Dmitry Taubinsky, 2013. "Market experience is a reference point in judgments of fairness," ECON - Working Papers 128, Department of Economics - University of Zurich.
    23. Brandts, Jordi & Riedl, Arno & van Winden, Frans, 2009. "Competitive rivalry, social disposition, and subjective well-being: An experiment," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1158-1167, December.
    24. Charles N. Noussair & Steven Tucker, 2013. "A Collection Of Surveys On Market Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 395-397, July.
    25. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
    26. Frank A. Cowell & Philippe Kerm, 2015. "Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 671-710, September.
    27. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October.
    28. Colin F. Camerer & Ernst Fehr, "undated". "Measuring Social Norms and Preferences using Experimental Games: A Guide for Social Scientists," IEW - Working Papers 097, Institute for Empirical Research in Economics - University of Zurich.
    29. Thomas Buser & Anna Dreber, 2016. "The Flipside of Comparative Payment Schemes," Management Science, INFORMS, vol. 62(9), pages 2626-2638, September.
    30. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    31. Marquis, Milton H. & Trehan, Bharat & Tantivong, Wuttipan, 2014. "The wage premium puzzle and the quality of human capital," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 100-110.
    32. Samuel Bowles & Robert Boyd & Colin Camerer & Ernst Fehr & Herbert Gintis & Joseph Henrich & Richard McElreath, 2001. "In search of homo economicus: Experiments in 15 small-scale societies," Artefactual Field Experiments 00068, The Field Experiments Website.
    33. Murphy, Ryan O. & Ackermann, Kurt A. & Handgraaf, Michel J. J., 2011. "Measuring Social Value Orientation," Judgment and Decision Making, Cambridge University Press, vol. 6(8), pages 771-781, December.
    34. Michael J. Sandel, 2013. "Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 121-140, Fall.
    35. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    36. Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 47-83, March.
    37. Sonnemans, Joep & Dijk, Frans van & Winden, Frans van, 2006. "On the dynamics of social ties structures in groups," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 187-204, April.
    38. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amelio, Andrea & Giardino-Karlinger, Liliane & Valletti, Tommaso, 2020. "Exclusionary pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    2. Kumar, Manish & Kumar, Arun, 2017. "Performance assessment and degradation analysis of solar photovoltaic technologies: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 554-587.
    3. Ginny Seung Choi & Virgil Henry Storr, 2018. "Market institutions and the evolution of culture," Evolutionary and Institutional Economics Review, Springer, vol. 15(2), pages 243-265, December.

    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. Brandts, Jordi & Riedl, Arno, 2020. "Market interaction and efficient cooperation," European Economic Review, Elsevier, vol. 121(C).
    2. Dariel, A. & Riedl, A.M., 2013. "Reciprocal preferences and the unraveling of gift-exchange," Research Memorandum 034, Maastricht University, Graduate School of Business and Economics (GSBE).
    3. Matteo M. Galizzi & Daniel Navarro-Martinez, 2019. "On the External Validity of Social Preference Games: A Systematic Lab-Field Study," Management Science, INFORMS, vol. 65(3), pages 976-1002, March.
    4. Bauernschuster, Stefan & Falck, Oliver & Große, Niels, 2013. "When trustors compete for the favour of a trustee – A laboratory experiment," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 133-147.
    5. Croson, Rachel & Gächter, Simon, 2010. "The science of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 122-131, January.
    6. Kai-Uwe Kuhn & Neslihan Uler, 2019. "Behavioral sources of the demand for carbon offsets: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 22(3), pages 676-704, September.
    7. Nicholas, Aaron, 2022. "Invisible Hand, invisible morals: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 395-418.
    8. Klaus M. Schmidt, 2011. "Social Preferences and Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 207-231, August.
    9. Felix Koelle, 2012. "Heterogeneity and Cooperation in Privileged Groups: The Role of Capability and Valuation on Public Goods Provision," Cologne Graduate School Working Paper Series 03-08, Cologne Graduate School in Management, Economics and Social Sciences.
    10. Alexander Peysakhovich & David G. Rand, 2016. "Habits of Virtue: Creating Norms of Cooperation and Defection in the Laboratory," Management Science, INFORMS, vol. 62(3), pages 631-647, March.
    11. Lacomba, Juan A. & Lagos, Francisco & Reuben, Ernesto & van Winden, Frans, 2017. "Decisiveness, peace, and inequality in games of conflict," Journal of Economic Psychology, Elsevier, vol. 63(C), pages 216-229.
    12. Rojas, Cristian & Cinner, Joshua, 2020. "Do market and trust contexts spillover into public goods contributions? Evidence from experimental games in Papua New Guinea," Ecological Economics, Elsevier, vol. 174(C).
    13. Robertas Zubrickas, 2009. "How Exposure to Markets Can Favor Inequity-Averse Preferences," Levine's Working Paper Archive 814577000000000130, David K. Levine.
    14. Timilsina, Raja R. & Kotani, Koji & Nakagawa, Yoshinori & Saijo, Tatsuyoshi, 2022. "Intragenerational deliberation and intergenerational sustainability dilemma," European Journal of Political Economy, Elsevier, vol. 73(C).
    15. Kölle, Felix, 2015. "Heterogeneity and cooperation: The role of capability and valuation on public goods provision," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 120-134.
    16. Murnighan, J. Keith & Wang, Long, 2016. "The social world as an experimental game," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 80-94.
    17. Bault, Nadège & Fahrenfort, Johannes J. & Pelloux, Benjamin & Ridderinkhof, K. Richard & van Winden, Frans, 2017. "An affective social tie mechanism: Theory, evidence, and implications," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 152-175.
    18. Klaus M. Schmidt, 2011. "Social Preferences and Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s1), pages 207-231, August.
    19. Marie Claire Villeval, 2012. "Contribution au bien public et préférences sociales : Apports récents de l'économie comportementale," Post-Print halshs-00681348, HAL.
    20. Sun-Ki Chai & Dolgorsuren Dorj & Katerina Sherstyuk, 2018. "Cultural Values and Behavior in Dictator, Ultimatum, and Trust Games: An Experimental Study," Research in Experimental Economics, in: Experimental Economics and Culture, volume 20, pages 89-166, Emerald Group Publishing Limited.

    More about this item

    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:unm:umagsb:2016006. 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: Andrea Willems or Leonne Portz (email available below). General contact details of provider: https://edirc.repec.org/data/meteonl.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.