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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Competitive pricing reduces wasteful counterproductive behaviors |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Public Economics |
| Publisher | Elsevier |
| Geographical Reach | international |
| ISSN | 0047-2727 |
| Volume | 156 |
| Page Range | 34 - 47 |
| Date | 2017 |
| Abstract Text | 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. |
| Digital Object Identifier | 10.1016/j.jpubeco.2017.08.007 |
| Other Identification Number | merlin-id:15620 |
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| Keywords | Counterproductive behavior, competitive pricing, markets, auctions, efficiency, inequality |