Abstract

https://ssrn.com/abstract=2441135
 
 

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Competitive Pricing Reduces Wasteful Counterproductive Behaviors


Björn Bartling


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

Manuel Grieder


ETH Zürich - Department of Humanities, Social and Political Sciences (GESS)

Christian Zehnder


University of Lausanne

February 8, 2017


Abstract:     
Counterproductive reactions to unfavorable trading prices can cause inefficiencies in economic exchange. This paper studies whether the use of a competitive pricing mechanism reduces such wasteful activities. We report data from a laboratory experiment where a powerful buyer can trade with one of two sellers - an environment that can lead to very low prices for the sellers. We find that low procurement prices trigger significantly less punishment by sellers if the buyer uses a competitive auction rather than his price-setting power to dictate the same terms of trade directly. Our data suggest that the use of competitive pricing mechanisms can mitigate inefficient reactions to unequal distributions of trade surplus.

Number of Pages in PDF File: 70

Keywords: Counterproductive behavior, competitive pricing, markets, auctions, efficiency, inequality

JEL Classification: C91, D31, D63, P10


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Date posted: May 24, 2014 ; Last revised: February 10, 2017

Suggested Citation

Bartling, Björn and Grieder, Manuel and Zehnder, Christian, Competitive Pricing Reduces Wasteful Counterproductive Behaviors (February 8, 2017). Available at SSRN: https://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)
ETH Zürich - Department of Humanities, Social and Political Sciences (GESS) ( email )
Clausiusstrasse 87
CLD C11
Zurich, 8093
Switzerland
Christian Zehnder
University of Lausanne ( email )
Lausanne, Vaud CH-1015
Switzerland
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