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American Economic Journal: Microeconomics: Vol. 1 No. 2 (August 2009)

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Market Culture: How Rules Governing Exploding Offers Affect Market Performance

Article Citation

Niederle, Muriel, and Alvin E. Roth. 2009. "Market Culture: How Rules Governing Exploding Offers Affect Market Performance." American Economic Journal: Microeconomics, 1(2): 199-219.

DOI: 10.1257/mic.1.2.199

Abstract

Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted, and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. (JEL C91, D40, D81)

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Authors

Niederle, Muriel (Stanford U)
Roth, Alvin E. (Harvard U)

JEL Classifications

C91: Design of Experiments: Laboratory, Individual
D40: Market Structure and Pricing: General
D81: Criteria for Decision-Making under Risk and Uncertainty

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