Abstract

http://ssrn.com/abstract=2441135
 
 

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Let the Market Decide: An Experimental Study of Competition and Fairness


Björn Bartling


University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Manuel Grieder


University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Christian Zehnder


University of Lausanne

May 23, 2014


Abstract:     
Is competition perceived as a fair procedure? We report data from laboratory experiments where a powerful buyer can trade with one of several sellers. Sellers who feel shortchanged can engage in counterproductive behavior to punish the buyer. We find that the same unfavorable terms of trade trigger significantly less punishment if the buyer uses a competitive auction to determine the terms of trade than if she uses her authority to dictate the same terms directly. Our results inform the debate on the fairness of market outcomes by showing that the use of a competitive procedure can, by itself, affect how people judge unequal distributive outcomes.

Number of Pages in PDF File: 50

Keywords: Competition, authority, markets, fairness, responsibility, procedures

JEL Classification: C91, D03, D63

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Date posted: May 24, 2014  

Suggested Citation

Bartling, Björn and Grieder, Manuel and Zehnder, Christian, Let the Market Decide: An Experimental Study of Competition and Fairness (May 23, 2014). Available at SSRN: http://ssrn.com/abstract=2441135 or http://dx.doi.org/10.2139/ssrn.2441135

Contact Information

Björn Bartling
University of Zurich - Department of Economics ( email )
Zuerich, 8006
Switzerland
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany
Manuel Grieder (Contact Author)
University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )
Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
HOME PAGE: http://www.hec.unil.ch/people/mgrieder
Christian Zehnder
University of Lausanne ( email )
Lausanne, 1015
Switzerland
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