We study whether people's preferences in an unbalanced
market are affected by whether they are on the excess
supply side or the excess demand side of the market. Our
analysis is based on the comparison of behavior between
two types of experimental gift exchange markets, which
vary only with respect to whether first or second movers
are on the long side of the market. The direction of market
imbalance could influence subjects' motivation, as second
movers, workers, might react differently ...
We study whether people's preferences in an unbalanced
market are affected by whether they are on the excess
supply side or the excess demand side of the market. Our
analysis is based on the comparison of behavior between
two types of experimental gift exchange markets, which
vary only with respect to whether first or second movers
are on the long side of the market. The direction of market
imbalance could influence subjects' motivation, as second
movers, workers, might react differently to favorable
actions by first movers, firms, in the two cases. Our data
show strong deviations from the standard game-theoretic
prediction. However, we only find secondary treatment
effects. First movers are not more generous when they
are in excess supply and second movers do not respond less
favorably when they are in excess demand. Competition has
only minor psychological effects in our data.
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