Market interaction and efficient cooperation

Recognition Program

Authors: Jordi Brandts and Arno Riedl

European Economic Review, Vol. 121, 103318, January, 2020

We experimentally study causal effects of competitive experience in markets with a short and a long side on efficiency levels attained in a subsequent social dilemma. We find that market experience affects efficiency when traders previously competed in the same market on the same side. The effect is strong for market-loser pairs and also exists for market-winner pairs, albeit to a lesser extent. Cooperation efficiency is unaffected for pairs consisting of a market-winner and a market-loser. When traders did not interact on the same market before, efficiency of cooperation is higher for market-winner pairs, but only in the short run.

This paper originally appeared as Barcelona School of Economics Working Paper 868
This paper is acknowledged by the Barcelona GSE Research Recognition Program