Experimental Markets with Frictions
18 Pages Posted: 4 Jun 2013
Date Written: July 2013
Decentralized and impersonal exchange is fundamental to contemporary economies, where many interactions take place among individuals with low levels of information about their counterpart. We review the experimental literature about markets with frictions, where strangers interact in pairs formed at random in economies of indefinite duration. We focus on the impact of communication on the efficiency of the outcome and report results of a new experiment.
Keywords: Coordination, Cheap‐talk, Deception, Indefinitely repeated game, Social norms
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