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

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

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

Coordination and Critical Mass in a Network Market: An Experimental Investigation

A network market is a market in which the benefit each consumer derives from a good is an increasing function of the number of consumers who own the same or similar goods. A major obstacle that plagues the introduction of a network good is the ability to reach critical mass, namely, the minimum number of buyers required to render purchase worthwhile. This can be likened to a coordination game with multiple Pareto-ranked equilibria. We introduce an experimental paradigm to study consumers' ability to coordinate on purchasing the network good. Our results highlight the central importance of the level of the critical mass.Experimental economics, network goods, coordination game, critical mass

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 construct an environment in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this experimental framework to test whether a labor income tax and an equivalent consumption tax lead to an identical labor-leisure allocation. Despite controlling for subjects’ work ability and inherent labor-leisure preferences and not allowing for saving, subjects reduce their labor supply significantly more in response to an income tax than they do in response to an equivalent consumption tax. We discuss the economic implications of a policy shift from an income to a consumption tax.experimental economics, tax equivalence, income tax, consumption tax, behavioral economics

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 construct an environment in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this experimental framework to test whether a labor income tax and an equivalent consumption tax lead to an identical labor-leisure allocation. Despite controlling for subjects’ work ability and inherent labor-leisure preferences and not allowing for saving, subjects reduce their labor supply significantly more in response to an income tax than they do in response to an equivalent consumption tax. We discuss the economic implications of a policy shift from an income to a consumption tax.experimental economics, tax equivalence, income tax, consumption tax, behavioraleconomics.

Coordination and Critical Mass in a Network Market: An Experimental Investigation

A network market is a market in which the benefit each consumer derives from a good is an increasing function of the number of consumers who own the same or similar goods. A major obstacle that plagues the introduction of a network good is the ability to reach critical mass, namely, the minimum number of buyers required to render purchase worthwhile. This can be likened to a coordination game with multiple Pareto-ranked equilibria. We introduce an experimental paradigm to study consumers' ability to coordinate on purchasing the network good. Our results highlight the central importance of the level of the critical mass.experimental economics, network goods, coordination game, critical mass

Do Buyer-Size Discounts Depend on the Curvature of the Surplus Function? Experimental Tests of Bargaining Models

A number of recent theoretical papers have shown that for buyer-size discounts to emerge in a bargaining model, the total surplus function over which parties bargain must have certain nonlinearities. We test the theory in an experimental setting in which a seller bargains with a number of buyers of different sizes. We generate nonlinearities in the surplus function by varying the shape of the seller's cost function. Our results strongly support the theory. As predicted, large-buyer discounts emerge only in the case of increasing marginal cost, corresponding to a concave surplus function.buyer-size discounts, large buyer, experimental economics.