Learning trust

We examine the effects of different forms of feedback information on the performance of markets that suffer from moral hazard problems due to sequential exchange. As orthodox theory would predict, we find that providing buyers with information about sellers' trading history boosts market performance. More surprisingly, this beneficial effect of incentives for reputation building is considerably enhanced if sellers, too, can observe other sellers' trading history. This suggests that two-sided market transparency is an important ingredient for the design of well-functioning markets that are prone to moral hazard

Sniping to Avoid the Endowment Eect in Auctions

An endowment effect can result in both multiple bidding and sniping in auctions. It can cause players to bid multiple times and overpay for items. Sniping is a rational response for experienced bidders looking to avoid the endowment effect.auction, eBay, multiple bidding, sniping, endowment effect

Solidarity and Performance Differences

To investigate the influence of performance differences on donating behavior in a solidarity game we introduce a real effort task. In each three-person-group subjects are ranked according to their task performance. Since each potential winner is informed about his own rank and the potential losers? ranks, they are able to regard performance differences between various potential losers and between themselves and a potential loser. We run another treatment without a real effort task to check for the influence of performance. We find different kinds of donating behaviour which seem to be fundamental characteristics.Solidarity, Performance Differences, Real Effort, Experiment

Wage Transparency and Performance: A Real-Effort Experiment

Without transparency about peer wages in a real effort experiment, a change of wages does not affect performance. With transparency, however, higher paid workers tend to work more accurately, and lower paid workers shirk more under piece rates.labor market experiments, real effort, social comparison, wage schemes

Bid Increments in Second-Price Sealed Bid Auctions

This note concerns bidding in a hybrid first-price and second-price auction. The winning bidder sometimes pays his bid and sometimes pays an amount determined by the next highest bid. In internet auctions where bidders wait until the end of the auction to bid the auction reduces to a sealed-bid auction and the bid function we derive may be relevant in such cases.sniper bidding, bid increments

Bid early and get it cheap - Timing effects in Internet auctions

Most internet auction sites, like eBay, use a proxy bidding system where bidders can put in their maximum bid and let a proxy bidder (a computer) bid for them. Yet many bidders speculate about how to bid and employ bidding strategies. This paper examines how the timing of bids can affect the final price. In a unique data set of 17,000 Scandinavian furniture auctions it turns out that early price increases, i.e. much early bidding, scare off bidders and therefore result in lower prices, whereas much late bidding results in higher prices. Sniping is therefore not a successful strategy to avoid bidding wars.Internet auctions, Auction fever, Pseudo-endowment, Bidding behavior, eBay, Strategies, WTP

Group reputations: an experimental foray

Often information structures are such that while individual reputation building is impossible groups of agents would have the opportunity of building up a reputation. We experimentally examine whether groups of sellers in markets that suffer from moral hazard are able to build up reputations and, thus, avoid market breakdown. We contrast our findings with situations where sellers alternatively can build up an individual reputation or where there are no possibilities for reputation building at all. Our results offer a rather optimistic outlook on group reputations. Even though sellers only receive some of the reputation benefits of withstanding short-run incentives to exploit trust, they are able to overcome the dilemma and successfully exploit the information structure

Understanding the role of Surcharfe Information Transparency and Pricing Strategies in Online Auctions

The current study offers insights into how different surcharge strategies can influence online auction success variables. We collected information of new iPod Nano auction transaction on eBay and found that auctions that did not provide clear shipping and handling (S&H) surcharge information significantly received lower final bids. This lack of transparency did not however affect the number of bids an auction received. We also found that, contrary to the traditional wisdom in the area of partitioned-pricing, online bidders can accurately adjust their bids according to the auctions’ surcharge amount. In addition, we found that the strategy of charging a higher S&H surcharge in an attempt to avoid commission fees did not help promote auction sellers’ revenue, nor the number of bids in the auctions. Practical guidelines are later offered in the study

Social Position and Distributive Justice: Experimental Evidence

Using a simple, double-blind dictator experiment, we examine the extent to which subjects\u27 choices of distributive shares are influenced by unearned social position. We measure social position by the initial distributive shares (resources) and the subjects\u27 ability to determine the final distributive shares (power). We find that subjects\u27 decisions are consistent with Rawls\u27 (1971) hypothesis that individuals expect a greater share when in a position with more power and initial resources. Finally, we test if subjects\u27 choices under a laboratory veil of ignorance are consistent with Rawls\u27 concept of distributive justice. Veiled individuals exhibit preferences that are less risk-averse and have greater variance than Rawls hypothesized. [excerpt

Speculative Attack and Informational Structure: an Experimental Study

This paper addresses the question of whether public information destabilises the economy in the context of signals of different nature. We present an experimental evaluation of the speculative attack game of Morris and Shin (1998). Our objective is twofold: to evaluate whether public information destabilises the economy within a context of signals of different nature and to enlarge upon the results of Heinemann, Nagel and Ockenfels (2004) (HNO). Our evidence suggests that in sessions with both private and common signals, the fact that the common signal plays a focal role enhances the central bank's welfare: it reduces the probability of crisis and increases its predictability. Therefore, we raise doubts about the policy implications of HNO's findings. The new policy lesson is that the central bank has more control over the beliefs of traders if it discloses one clear signal when agents also get private information from other sources.speculative attacks; private information; public information