Does Learning Lead to Coordination on Market Clearing Institutions?

This paper analyzes the question whether traders learn to coordinate on a trading institution that guarantees market clearing, or whether other market institutions can survive in the long run. While we find that the market clearing institution is indeed always stable under a general class of learning dynamics, it turns out that also other, non-market clearing institutions are stable. Hence, in the long run traders may fail to coordinate exclusively on market clearing institutions.industrial organization ;

Does Learning Lead to Coordination in Market Clearing Institutions?

This paper analyzes the question of whether traders learn to coordinate on a trading institution that guarantees market clearing, or whether other market institutions can survive in the long run. While we find that the market clearing institution is indeed always stable under a general class of learning dynamics, it turns out that also other, non-market clearing institutions are stable. Hence, in the long run traders may fail to coordinate exclusively in market clearing institutions.

Your Morals Are Your Moods

We test the effect of players' moods on their behavior in a gift-exchange game. In the first stage of the game, player 1 chooses a transfer to player 2. In the second stage, player 2 chooses an effort level. Higher effort is more costly for player 2, but it increases player 1's payoff. We say that player 2 reciprocates if effort is increasing in the transfer received. Player 2 is generous if an effort is incurred even when no transfer is received. Subjects play this game in two different moods. To induce a `bad mood', subjects in the role of player 2 watched a sad movie before playing the game; to induce a `good mood', they watched a funny movie. Mood induction was effective: subjects who saw the funny movie reported a significantly better mood than those who saw the sad movie. These two moods lead to significant differences in player 2's behavior. We find that a bad mood implies more reciprocity while a good mood implies more generosity. Since high transfers are relatively more common, player 1 makes more money when second movers are in a bad mood.

Learning to Like What You Have - Explaining the Endowment Effect

The endowment effect describes the fact that people demand much more to give up an object than they are willing to spend to acquire it. The existence of this effect has been documented in numerous experiments. We attempt to explain this effect by showing that evolution favors individuals whose preferences embody an endowment effect. The reason is that an endowment effect improves one's bargaining position in bilateral trades. We show that for a general class of evolutionary processes strictly positive endowment effects will survive in the long run.endowment effect, evolution, bargaining

On the Evolution of Trading Institutions: The Platform Design Paradox

This paper analyzes a learning model where sophisticated market designers create new trading platforms and boundedly rational traders select among them. We ask wether "Walrasian'''' platforms, leading to efficient (market - clearing) trading outcomes, will dominate the market in the long run. If several market designers are competing, we find that traders will learn to select non-market clearing platforms with prices systematically above the market-clearing level, provided at least one such platform is introduced by a market designer. This in turn leads all market designers to introduce such inefficient (non-market clearing) platforms. Hence platform competition induces non-competitive market outcomes.economic systems ;

On the Evolution of Market Institutions: The Platform Design Paradox

We study competition among market designers who create new trading platforms, when boundedly rational traders learn to select among them. We ask whether efficient platforms, leading to market - clearing trading outcomes, will dominate the market in the long run. If several market designers are competing, we find that traders learn to select non-market clearing platforms with prices systematically above the market-clearing level, provided at least one such platform is introduced by a market designer. This in turn leads market designers to introduce non-market clearing platforms. Hence platform competition induces non-competitive market outcomes.market institutions, evolution of trading platforms, learning, asymmetric rationality

Myopic or Farsighted? An Experiment on Network Formation

Pairwise stability (Jackson and Wolinsky, 1996) is the standard stability concept in network formation. It assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions. Assuming that agents are farsighted, related stability concepts have been proposed. We design a simple network formation experiment to test these theories. Our results provide support for farsighted stability and strongly reject the idea of myopic behavior.Network Formation, Experiment, Myopic and Farsighted Stability

Insider Power, Wage Discrimination, and Fairness

Insider Power, Wage Discrimination, Fairness