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

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  • Jordi Brandts
  • Gary Charness

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.

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  • Jordi Brandts & Gary Charness, 2000. "Do market conditions affect preferences? Evidence from experimental markets with excess supply and excess demand," Economics Working Papers 491, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:491
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    Cited by:

    1. Gary Bolton & Axel Ockenfels, 2005. "A stress test of fairness measures in models of social utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(4), pages 957-982, June.
    2. Simon G�chter & Ernst Fehr, "undated". "Fairness in the Labour Market � A Survey of Experimental Results," IEW - Working Papers 114, Institute for Empirical Research in Economics - University of Zurich.

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    More about this item

    Keywords

    Experiment; unbalanced markets; cooperation; gift--exchange; Leex;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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