|Abstract : |
Anecdotal evidence suggests people respond negatively to exploding (i.e., ``take-it-or-leave-it'') offers, and sellers are reluctant to use such offers. This paper examines this conjecture in an experimental search market which buyers visit sequentially in a random order. Each market has two sellers and each seller can choose either an exploding offer (which is nullified once the buyer visits the other seller) or an offer that the buyer may revisit. In this environment, there is a unique Nash equilibrium where sellers should use an exploding offer and charge the highest possible price. Experimental sellers quickly converge to this equilibrium when matched against computer buyers programmed to play optimal strategy. However, when matched against human buyers, sellers do not follow equilibrium play, avoiding exploding offers and offering lower prices. Buyers reject exploding offers more frequently. These results cannot be explained by risk aversion nor are they consistent with inexperienced buyers in other experimental search games. They do suggest both buyers and sellers have attitudes toward exploding offers not directly expressed by monetary incentives.
(The presentation will be in English)
By : |
Mr. Ajalavat Viriyavipart, Ph.D. student in economics at Texas A&M University, USA.
Venue : |
Meeting Room 60 years (2), Faculty of Economics, Thammasat University, Tha Prachan
Free / No Reservation Request