Should the Same Side of the Market Always Move First in a Transaction? An Experimental Study

We investigate whether transactions where the buyer (or seller) always moves first and the seller (or buyer) always moves second in the exchange give higher payoffs than transactions in which it is randomly determined who moves first. We examine the effect of two treatment variables: partners versus...

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Bibliographic Details
Published in:Journal of institutional and theoretical economics 2002-06, Vol.158 (2), p.344-367
Main Authors: van der Heijden, Eline C. M., Nelissen, Jan H. M., Verbon, Harrie A. A.
Format: Article
Language:English
Subjects:
Employment
Endowments
Exchange
Experimentation
Experiments
Fairness
First mover advantage
Game theory
Histograms
Nash equilibrium
Pay-off
Return on investment
Sequential analysis
Supply
Transactional analysis
Wages
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Summary:We investigate whether transactions where the buyer (or seller) always moves first and the seller (or buyer) always moves second in the exchange give higher payoffs than transactions in which it is randomly determined who moves first. We examine the effect of two treatment variables: partners versus strangers, and fixed versus changing positions. We find that both with fixed and with changing positions, second movers take advantage of their position by exploiting the first mover. But with fixed positions, exploitation occurs significantly less, while reciprocal exchanges happen more often. However, fixed positions result in very unevenly distributed payoffs.
ISSN:0932-4569
DOI:10.1628/0932456022975420