Markets versus negotiations: An experimental investigation

Tamar Kugler; Zvika Neeman; Nir Vulkan

doi:10.1016/j.geb.2005.06.003

Markets versus negotiations: An experimental investigation

Tamar Kugler^*, Zvika Neeman, Nir Vulkan

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

16 Scopus citations

Abstract

We consider the consequences of competition between two types of experimental exchange mechanisms, a "decentralized bargaining" market, and a "centralized" market. It is shown that decentralized bargaining is subject to a process of "unraveling" in which relatively high value traders (buyers with a high willingness to pay and sellers with low costs) continuously find trading in the centralized markets more attractive until few opportunities for mutually beneficial trade remain outside the centralized marketplace.

Original language	English
Pages (from-to)	121-134
Number of pages	14
Journal	Games and Economic Behavior
Volume	56
Issue number	1
DOIs	https://doi.org/10.1016/j.geb.2005.06.003
State	Published - Jul 2006
Externally published	Yes

Funding

Funders	Funder number
Aims Byudks foundation

Keywords

Centralized markets
Decentralized bargaining
Decentralized markets
Market design
Market formation

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10.1016/j.geb.2005.06.003

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keywords = "Centralized markets, Decentralized bargaining, Decentralized markets, Market design, Market formation",

author = "Tamar Kugler and Zvika Neeman and Nir Vulkan",

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AU - Neeman, Zvika

AU - Vulkan, Nir

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N2 - We consider the consequences of competition between two types of experimental exchange mechanisms, a "decentralized bargaining" market, and a "centralized" market. It is shown that decentralized bargaining is subject to a process of "unraveling" in which relatively high value traders (buyers with a high willingness to pay and sellers with low costs) continuously find trading in the centralized markets more attractive until few opportunities for mutually beneficial trade remain outside the centralized marketplace.

AB - We consider the consequences of competition between two types of experimental exchange mechanisms, a "decentralized bargaining" market, and a "centralized" market. It is shown that decentralized bargaining is subject to a process of "unraveling" in which relatively high value traders (buyers with a high willingness to pay and sellers with low costs) continuously find trading in the centralized markets more attractive until few opportunities for mutually beneficial trade remain outside the centralized marketplace.

KW - Centralized markets

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KW - Decentralized markets

KW - Market design

KW - Market formation

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Markets versus negotiations: An experimental investigation

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