Not logged in.

Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Does competition justify inequality?
Organization Unit
  • Björn Bartling
  • Manuel Grieder
  • Christian Zehnder
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 158
ISSN 1664-7041
Number of Pages 57
Date 2015
Abstract Text Are competitive mechanisms perceived as just sources of economic inequality? Perceptions of fairness violations can have severe economic consequences, as they may cause counterproductive behavior such as rulebook slowdowns or quality shading. To analyze fairness perceptions associated with competitive mechanisms, we run laboratory experiments where a single powerful buyer can trade with one of several sellers—an environment that can lead to pronounced inequality among the interacting parties. Once the terms of trade are determined, sellers can engage in counterproductive behavior. We robustly find that low procurement prices, which allocate most of the surplus from trade to the buyer, trigger significantly less counterproductive behavior if the buyer uses a competitive auction to determine the terms of trade than if he uses his price setting power to dictate the same terms directly. Our data demonstrate that competitive mechanisms, in addition to their capability to produce efficient allocations, can reduce conflict and inefficient reactions by increasing justification for economic inequality.
Free access at Official URL
Official URL
Related URLs
PDF File Download from ZORA
Export BibTeX
Keywords Fairness, competition, markets, efficiency, inequality, Fairness, Ungleichheit, Prozedurale Gerechtigkeitstheorie, Wettbewerb
Additional Information Revised version ; former title: "Let the market decide: an experimental study of competition and fairness"