[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_5694.html
   My bibliography  Save this paper

Market Interaction and Efficient Cooperation

Author

Listed:
  • Jordi Brandts
  • Arno Riedl
Abstract
We experimentally study the causal effects of different types of market experience on the efficiency levels attained in a subsequent social dilemma. Our motivation stems from the existence of contrasting views on the potential spillover effects of participation in markets on non-market activities requiring cooperation. In our setup, market interaction takes place in a competitive market involving a short and a long side. Our focus is on the comparison of the efficiency levels attained in a subsequent social dilemma by pairs of individuals who were on the short side of the market, market-winners, with that of individuals who were on the long side, market-losers. We 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. We compare the efficiency of cooperation with and without market experience controlling for earnings, allowing us to identify the causal effects of market interaction. The results show that the experience of market interaction has a negative effect on cooperation efficiency in Market-Partners, that is among those who had to compete with each other on on the same side of the market. This holds for both market-losers and market-winners pairs. By contrast, for Market-Strangers we find the positive effect of market experience cooperation efficiency for market-winner pairs. Our results are consistent with the idea that direct competition damages social ties and the more general notion of state-dependent preferences.

Suggested Citation

  • Jordi Brandts & Arno Riedl, 2016. "Market Interaction and Efficient Cooperation," CESifo Working Paper Series 5694, CESifo.
    • Handle: RePEc:ces:ceswps:_5694
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp5694.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
    10. Vernon L. Smith, 1998. "The Two Faces of Adam Smith," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 2-19, July.
    11. 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.
    12. 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.
    13. Frank A. Cowell & Philippe Kerm, 2015. "Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 671-710, September.
    14. 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.
    15. 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.
    16. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October.
    17. 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.
    18. 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.
    19. 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.
    20. 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.
    21. 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.
    22. Huck, Steffen & Lünser, Gabriele K. & Tyran, Jean-Robert, 2012. "Competition fosters trust," Games and Economic Behavior, Elsevier, vol. 76(1), pages 195-209.
    23. 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.
    24. Holger Herz & Dmitry Taubinsky, 2018. "What Makes a Price Fair? An Experimental Study of Transaction Experience and Endogenous Fairness Views," Journal of the European Economic Association, European Economic Association, vol. 16(2), pages 316-352.
    25. repec:cup:judgdm:v:6:y:2011:i:8:p:771-781 is not listed on IDEAS
    26. David Gill & Victoria Prowse, 2012. "A Structural Analysis of Disappointment Aversion in a Real Effort Competition," American Economic Review, American Economic Association, vol. 102(1), pages 469-503, February.
    27. Thomas Buser & Anna Dreber, 2016. "The Flipside of Comparative Payment Schemes," Management Science, INFORMS, vol. 62(9), pages 2626-2638, September.
    28. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    29. 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.
    30. 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.
    31. 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.
    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. 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.
    34. 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.
    35. Zacharias Maniadis & Fabio Tufano & John A. List, 2014. "One Swallow Doesn't Make a Summer: New Evidence on Anchoring Effects," American Economic Review, American Economic Association, vol. 104(1), pages 277-290, January.
    36. 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.
    37. Frans van Winden, 2012. "Affective Social Ties - Missink Link in Governance Theory," Rationality, Markets and Morals, Frankfurt School Verlag, Frankfurt School of Finance & Management, vol. 3(57), October.
    38. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
    39. Camerer, Colin & Dreber, Anna & Forsell, Eskil & Ho, Teck-Hua & Huber, Jurgen & Johannesson, Magnus & Kirchler, Michael & Almenberg, Johan & Altmejd, Adam & Chan, Taizan & Heikensten, Emma & Holzmeist, 2016. "Evaluating replicability of laboratory experiments in Economics," MPRA Paper 75461, University Library of Munich, Germany.
    40. 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.
    41. 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.
    42. 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.
    43. 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.
    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. Liu, Dan & Meagher, Kieron J. & Wait, Andrew, 2022. "Market conditions and firm morality: Employee trust in the honesty of their managers," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 89-106.
    2. Grosch, Kerstin & Ibañez, Marcela & Viceisza, Angelino, 2022. "Competition and prosociality: A lab-in-the-field experiment in Ghana," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 99(C).
    3. Bokern, Paul & Linde, Jona & Riedl, Arno & Werner, Peter, 2023. "The robustness of preferences during a crisis: The case of COVID-19," Research Memorandum 012, Maastricht University, Graduate School of Business and Economics (GSBE).
    4. Zou, Wenbo & Wang, Jinjie & Yan, Jubo, 2022. "Online markets and trust," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 395-412.
    5. Choi, Ginny Seung & Storr, Virgil Henry, 2023. "The morality of markets in theory and empirics," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 590-607.
    6. Sarracino, Francesco & Slater, Giulia, 2024. "The trust paradox," MPRA Paper 120053, University Library of Munich, Germany.

    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, J. & Riedl, A.M., 2016. "Market competition and efficient cooperation," Research Memorandum 006, Maastricht University, Graduate School of Business and Economics (GSBE).
    2. 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.
    3. Croson, Rachel & Gächter, Simon, 2010. "The science of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 122-131, January.
    4. 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).
    5. Holger Herz & Dmitry Taubinsky, 2018. "What Makes a Price Fair? An Experimental Study of Transaction Experience and Endogenous Fairness Views," Journal of the European Economic Association, European Economic Association, vol. 16(2), pages 316-352.
    6. Holger Herz & Dmitry Taubinsky, 2016. "What Makes a Price Fair? An Experimental Analysis of Transaction Experience and Endogenous Fairness Views," NBER Working Papers 22728, National Bureau of Economic Research, Inc.
    7. 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.
    8. 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.
    9. Nicholas, Aaron, 2022. "Invisible Hand, invisible morals: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 395-418.
    10. Klaus M. Schmidt, 2011. "Social Preferences and Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 207-231, August.
    11. 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.
    12. 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.
    13. 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.
    14. 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).
    15. Robertas Zubrickas, 2009. "How Exposure to Markets Can Favor Inequity-Averse Preferences," Levine's Working Paper Archive 814577000000000130, David K. Levine.
    16. Gächter, Simon & Kölle, Felix & Quercia, Simone, 2022. "Preferences and perceptions in Provision and Maintenance public goods," Games and Economic Behavior, Elsevier, vol. 135(C), pages 338-355.
    17. Gautam Gupta, 2019. "Experiments in Economics: A Survey," Studies in Microeconomics, , vol. 7(1), pages 89-109, June.
    18. 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.
    19. 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.
    20. Klaus M. Schmidt, 2011. "Social Preferences and Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s1), pages 207-231, August.

    More about this item

    Keywords

    competition; cooperation; experiments;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D30 - Microeconomics - - Distribution - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

    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:ces:ceswps:_5694. 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: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.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.