Abstract

http://ssrn.com/abstract=495761
 
 

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Market Culture: How Norms Governing Exploding Offers Affect Market Performance


Muriel Niederle


Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Alvin E. Roth


HBS Negotiations, Organizations and Markets Unit; National Bureau of Economic Research (NBER)

February 2004

NBER Working Paper No. w10256

Abstract:     
Many markets have organizations that influence or try to establish norms concerning when offers can be made, accepted and rejected. Examining a dozen previously studied markets suggests that markets in which transactions are made far in advance are markets in which it is acceptable for firms to make exploding offers, and unacceptable for workers to renege on commitments they make, however early. But this evidence is only suggestive, because the markets differ in many ways other than norms concerning offers. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple environment, in which uncertainty about applicants' quality is resolved over time, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. Relaxing either of these two conditions causes matching to take place later, when more information about applicants' qualities is available, and consequently results in higher efficiency and fewer blocking pairs. This suggests that elements of market culture may play an important role in influencing market performance.

Number of Pages in PDF File: 59

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Date posted: January 31, 2004  

Suggested Citation

Niederle, Muriel and Roth, Alvin E., Market Culture: How Norms Governing Exploding Offers Affect Market Performance (February 2004). NBER Working Paper No. w10256. Available at SSRN: http://ssrn.com/abstract=495761

Contact Information

Muriel Niederle (Contact Author)
Stanford University - Department of Economics ( email )
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Alvin E. Roth
HBS Negotiations, Organizations and Markets Unit ( email )
Soldiers Field
Boston, MA 02163
United States
617-495-5447 (Phone)
617-496-7379 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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