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CompetitionAndCounterprodBehaviors_SSRN_version
Journal article

Competitive Pricing Reduces Wasteful Counterproductive Behaviors

  • 2017
Published in:
  • Journal of Public Economics. - 2017, vol. 156, p. 34-47
Counterproductive behavior, competitive pricing, markets, auctions, efficiency, inequality
English 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.
Language
  • English
Classification
Economics
Other electronic version

Published version

License
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Open access status
closed
Identifiers
  • ARK ark:/51647/srd1323769
Persistent URL
https://n2t.net/ark:/51647/srd1323769
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