When Do Large Buyers Pay Less? Experimental Evidence

The rise in mega-retailers has contributed to a growing literature on buyer power and large-buyer discounts. According to Rotemberg and Saloner (1986) and Snyder (1998), large buyers’ ability to obtain price discounts depends on their relative (rather than absolute) size and the degree of competition between suppliers. I test experimentally comparative statics implications of this theory concerning the number of sellers and the sizes of the buyers in the market. The results track the comparative statics predictions to a surprising extent. Subtle changes in the distribution of buyer sizes or the number of suppliers can create or negate large-buyer discounts. The results highlight the previously unexplored role of the demand structure in determining buyer-size discounts. Furthermore, the experiments establish the presence of small-buyer premia, not anticipated by the theory.experimental economics, large-buyer discounts, buyer power, seller competition.

When Do Large Buyers Pay Less? Experimental Evidence

The rise in mega-retailers has contributed to a growing literature on buyer power and large-buyer discounts. According to Rotemberg and Saloner (1986) and Snyder (1998), large buyers' ability to obtain price discounts depends on their relative (rather than absolute) size and the degree of competition between suppliers. I test experimentally comparative statics implications of this theory concerning the number of sellers and the sizes of the buyers in the market. The results track the comparative statics predictions to a surprising extent. Subtle changes in the distribution of buyer sizes or the number of suppliers can create or negate large-buyer discounts. The results highlight the previously unexplored role of the demand structure in determining buyer-size discounts. Furthermore, the experiments establish the presence of small-buyer premia, not anticipated by the theory.experimental economics, large-buyer discounts, buyer power, seller competition

Cooperation and the In-Group-Out-Group Bias: A Field Test on Israeli Kibbutz Members and City Residents

The in-group-out-group bias is among the most well documented and widely observed phenomenon in the social sciences. Despite its role in hiring decisions and job discrimination, negotiations, and conflict and competition between groups, economists have paid little attention to the in-group-out-group bias. We question the universality of the bias by conducting field experiments to test whether it extends to the cooperative behavior of one of the most successful and best-known modern collective societies, the Israeli kibbutz. The facts that kibbutz members have voluntarily chosen their lifestyle of cooperation and egalitarianism, the ease with which they could join the surrounding capitalist society and their disproportionate involvement in social and national causes suggest that if ever there was a society of individuals whose cooperativeness extends equally to members and non-members, the kibbutz is it. Nonetheless, our results indicate that kibbutz members display higher levels of cooperation when paired with anonymous kibbutz members than when paired with city residents. In fact, when paired with city residents, kibbutz members-observed levels of cooperation are identical to those of the city residents. Moreover, we show that self-selection rather than kibbutz socialization largely accounts for the extent to which kibbutz members are cooperative.cooperation, in-group-out-group bias, field experiment, self-selection, socialization, kibbutz

It's My Turn ... Please, After You: An Experimental Study of Cooperation and Social Conventions

We introduce a class of two-player cooperation games where each player faces a binary decision, enter or exit. These games have a unique Nash equilibrium of entry. However, entry imposes a large enough negative externality on the other player such that the unique social optimum involves the player with the higher value to entry entering and the other player exiting. When the game is repeated and players' values to entry are private, cooperation admits the form of either taking turns entering or using a cutoff strategy and entering only for high private values of entry. Even with conditions that provide opportunities for unnoticed or non-punishable 'cheating', our empirical analysis including a simple strategy inference technique reveals that the Nash-equilibrium strategy is never the modal choice. In fact, most subjects employ the socially optimal symmetric cutoff strategy. These games capture the nature of cooperation in many economic and social situations such as bidding rings in auctions, competition for market share, labor supply decisions in the face of excess supply, queuing in line and courtship.cooperation, incomplete information, random payoffs, strategy inference, experimental economics.

Does It Pay To Pray? Evaluating the Economic Return to Religious Ritual

Time-consuming and costly religious rituals pose a puzzle for economists committed to rational choice theories of human behavior. We propose that religious rituals promote in-group trust and cooperation that help to overcome collective-action problems. To test this hypothesis we design field experiments to measure the in-group cooperative behavior of members of religious and secular Israeli kibbutzim, communal societies for which mutual cooperation is a matter of survival. Our results show that religious males (the primary practitioners of collective religious ritual in Orthodox Judaism) are more cooperative than religious females, secular males and secular females. Moreover, the frequency with which religious males engage in collective religious rituals predicts well their degree of cooperative behavior. We use our results to understand differences in the return to religious observance in capitalist and developing economies.economics of religion, field experiment, religious ritual, cooperation, signaling, kibbutz

Which way to cooperate

Cooperation in real-world dilemmas takes many forms. We introduce a class of two-player games that permits two distinct ways to cooperate in the repeated game. One way to cooperate is to play cutoff strategies, which rely solely on a player's private value to defection. The second cooperative strategy is to take turns, which relies on publicly available information. Our initial experiments reveal that almost all cooperators adopt cutoff strategies. However, follow-up experiments in which the distribution of values to defection are made more similar show that all cooperators now take turns. Our results offer insight into what form a cooperative norm will take: for mundane tasks or where individuals otherwise have similar payoffs, taking turns is likely; for difficult tasks that differentiate individuals by skill or by preferences, cutoff cooperation will emerge.experimental economics; cooperation; incomplete information; alternating; cutoff strategies; random payoffs

Do religious contexts elicit more trust and altruism? An experiment on Facebook

We design a decision-making scenario experiment on Facebook to measure subjects’ altruism and trust toward attendees of a religious service, a fitness class and a local music performance. Secular and religious subjects alike display significantly more altruism and trust toward the synagogue attendees than participants at the other two venues. By all measures of religiosity, even the most secular subjects behave more prosocially in the religious venue than in the comparable non-religious settings. We also find that secular subjects are just as altruistic toward synagogue and prayer group members as religious subjects are. These findings support recent theories that emphasize the pivotal role of religious context in arousing high levels of prosociality among those who are religious. Finally, our results offer startlingly little evidence for the widely documented religious-secular divide in Israel.religion, trust, altruism, religious context, religious-secular conflict

BUYER CONCENTRATION AS A SOURCE OF COUNTERVAILING POWER: EVIDENCE FROM EXPERIMENTAL POSTED-OFFER MARKETS

We experimentally examine the impact of buyer concentration on the pricing of a monopolist. In our experimental markets, a monopolist faces either two or four buyers. Markets with two buyers achieve significantly lower prices, sometimes below competitive levels, than those with four buyers. We design an additional pair of treatments to pinpoint the source of this difference. We attribute the lower pries in the two-buyer treatment to the monopolist pricing more cautiously when there are fewer buyers in order to avoid costly losses in sales. Buyer concentration may thus be an elective source of countervailing power.

Cooperation and the In-Group-Out-Group Bias: A Field Test on Israeli Kibbutz Members and City Residents

The in-group-out-group bias is among the most well documented and widely observed phenomenon in the social sciences. Despite its role in hiring decisions and job discrimination, negotiations, and conflict and competition between groups, economists have heretofore ignored the in- group-out-group bias. We question the universality of the bias by designing field experiments to test whether it extends to the cooperative behavior of one of the most successful and best-known modern collective societies, the Israeli kibbutz. The facts that kibbutz members have voluntarily chosen their lifestyle of cooperation and egalitarianism, the ease with which they could join the surrounding capitalist society, their disproportionate involvement in social and national causes and their revealed willingness to sacrifice for the benefit of Israeli society as a whole suggest that if ever there was a society of individuals whose cooperativeness extends equally to members and non-members, the kibbutz is it. Nonetheless, the findings from our field experiments indicate that kibbutz members display higher levels of cooperation when paired with anonymous kibbutz members than when paired with city residents. In fact, when paired with city residents, kibbutz members’ observed levels of cooperation are identical to those displayed by the city residents. Moreover, we present evidence that kibbutz socialization actually damages the willingness of members to cooperate with one another.cooperation, in-group-out-group bias, field experiment, self- selection, socialization, kibbutz

Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods

The public finance literature demonstrates the equivalence between consumption and labor-income (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a labor-income tax and an equivalent consumption tax lead to identical labor-leisure allocations. Despite controlling for subjects’ work ability and inherent labor-leisure preferences and disallowing saving, subjects reduce their labor supply significantly more in response to an income tax than to an equivalent consumption tax. We discuss the economic implications of a policy shift to a consumption tax.experimental economics, tax equivalence, income tax, consumption tax, behavioral economics