Market Interaction and Efficient Cooperation
126 Pages Posted: 12 Aug 2019
Date Written: June 9, 2019
We experimentally study causal effects of competitive experience in markets with a short and a long side on efficiency levels attained in a subsequent social dilemma. We find that market experience affects efficiency when traders previously competed in the same market on the same side. The effect is strong for market-loser pairs and also exists for market-winner pairs, albeit to a lesser extent. Cooperation efficiency is unaffected for pairs consisting of a market-winner and a market-loser. When traders did not interact on the same market before, efficiency of cooperation is higher for market-winner pairs, but only in the short run.
Keywords: competitive market, social dilemma, experiment
JEL Classification: A13, C92, D30, D60
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