Header

UZH-Logo

Maintenance Infos

Competitive pricing reduces wasteful counterproductive behaviors


Bartling, Björn; Grieder, Manuel; Zehnder, Christian (2017). Competitive pricing reduces wasteful counterproductive behaviors. Journal of Public Economics, 156:34-47.

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.

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.

Statistics

Citations

Altmetrics

Downloads

1 download since deposited on 19 Dec 2017
1 download since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Counterproductive behavior; competitive pricing; markets; auctions; efficiency; inequality
Language:English
Date:December 2017
Deposited On:19 Dec 2017 16:43
Last Modified:19 Feb 2018 09:48
Publisher:Elsevier
ISSN:0047-2727
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.jpubeco.2017.08.007

Download