Costs of implementation: Bargaining costs versus allocative efficiency

Journal of Economic Behavior and Organization, pp. 318-325, 2011.

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experimentsc91c78bargaining costsmechanism designMore(5+)

Abstract:

A mechanism with low direct cost of use may be preferred to alternatives implementing more efficient allocations. We show this experimentally by giving pairs of subjects the option to agree on a single average price for a sequence of trades—in effect pooling several small bargains into a larger one. We make pooling costly by tying it to s...More

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