A Market with Frictions in the Matching Process: An Experimental Study

27 Pages Posted: 11 Apr 2007

See all articles by Timothy N. Cason

Timothy N. Cason

Purdue University - Krannert School of Management

Charles N. Noussair

Tilburg University

Abstract

We construct a laboratory market in which there is a friction in the matching between buyers and sellers. Sellers simultaneously post prices and then buyers simultaneously choose a seller. If more than one buyer chooses the same seller, the seller's single unit is randomly sold to one of them. Our results show a broad consistency with theoretical predictions, although price dispersion exists and is slow to decay. Prices also exceed the equilibrium level when there are only two sellers, and buyers' purchase probabilities are insufficiently responsive to price differences when there are two sellers.

Suggested Citation

Cason, Timothy N. and Noussair, Charles N., A Market with Frictions in the Matching Process: An Experimental Study. International Economic Review, Vol. 48, No. 2, pp. 665-691, May 2007. Available at SSRN: https://ssrn.com/abstract=979640 or http://dx.doi.org/10.1111/j.1468-2354.2007.00441.x

Timothy N. Cason (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-1737 (Phone)

Charles N. Noussair

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

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