An Experiment on a Core Controversy

Posted: 23 Mar 2021

See all articles by Huibin Yan

Huibin Yan

University of California, Santa Cruz

Daniel Friedman

University of California, Santa Cruz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

David Munro

Middlebury College

Date Written: 2016

Abstract

A longstanding criticism of the core is that it is too sensitive to small changes in player numbers, as in a well known example where one extra seller (resp. buyer) causes the entire surplus to go to the buyer's (seller's) side. We test this example in the lab, using several different trading institutions. We find that successful collusion is relatively infrequent and decreasing over time even with institutions that facilitate collusion and, consistent with core theory, a disproportionate share of the surplus typically goes to the less numerous side. Our study also illuminates the boundaries of competitive equilibrium.

Keywords: Core, Collusion, Experiment, Fairness Market

JEL Classification: C71,C78,C92,D43

Suggested Citation

Yan, Huibin and Friedman, Daniel and Munro, David, An Experiment on a Core Controversy (2016). Games and Economic Behavior, Vol. 96, 2016, Available at SSRN: https://ssrn.com/abstract=3801841

Huibin Yan

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

Daniel Friedman

University of California, Santa Cruz - Department of Economics ( email )

Social Sciences I
Santa Cruz, CA 95064
United States
831-459-4981 (Phone)
831-459-5900 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David Munro (Contact Author)

Middlebury College ( email )

Munroe Hall
Middlebury, VT 05753
United States

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