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Multiple Openings and Competitiveness of Forward Markets: Experimental Evidence.

ABSTRACT: We test the competition enhancing effect of selling forward in experimental Cournot duopoly and quadropoly with multiple forward markets. We find that two forward periods yields competitive outcomes and that the results are very close to the predicted theoretical results for quantity setting duopolies and quadropolies. Our experiments lend strong support to the hypothesis that forward markets are competition enhancing. We then test a new market that allows for endogenously determined indefinitely many forward periods that only close when sellers coordinate on selling a zero amount in a forward market. We find that the outcomes under an endogenous close rule are also very competitive. These results hold for both duopolies and quadropolies.

SUBMITTER: Ferreira JL

PROVIDER: S-EPMC4956257 | biostudies-literature | 2016

REPOSITORIES: biostudies-literature

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Multiple Openings and Competitiveness of Forward Markets: Experimental Evidence.

Ferreira José Luis JL Kujal Praveen P Rassenti Stephen S

PloS one 20160721 7

We test the competition enhancing effect of selling forward in experimental Cournot duopoly and quadropoly with multiple forward markets. We find that two forward periods yields competitive outcomes and that the results are very close to the predicted theoretical results for quantity setting duopolies and quadropolies. Our experiments lend strong support to the hypothesis that forward markets are competition enhancing. We then test a new market that allows for endogenously determined indefinitel ...[more]

PMID: 27442516

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Project description:Most societies prohibit some market transactions based on moral concerns, even when the exchanges would benefit the parties involved and would not create negative externalities. A prominent example is given by payments for human organs for transplantation, banned virtually everywhere despite long waiting lists and many deaths of patients who cannot find a donor. Recent research, however, has shown that individuals significantly increase their stated support for a regulated market for human organs when provided with information about the organ shortage and the potential beneficial effects a price mechanism. In this study we focused on payments for human organs and on another "repugnant" transaction, indoor prostitution, to address two questions: (A) Does providing general information on the welfare properties of prices and markets modify attitudes toward repugnant trades? (B) Does additional knowledge on the benefits of a price mechanism in a specific context affect attitudes toward price-based transactions in another context? By answering these questions, we can assess whether eliciting a market-oriented approach may lead to a relaxation of moral opposition to markets, and whether there is a cross-effect of information, in particular for morally controversial activities that, although different, share a reference to the "commercialization" of the human body. Relying on an online survey experiment with 5,324 U.S. residents, we found no effect of general information about market efficiency, consistent with morally controversial markets being accepted only when they are seen as a solution to a specific problem. We also found some cross-effects of information about a transaction on the acceptance of the other; however, the responses were mediated by the gender and (to a lesser extent) religiosity of the respondent--in particular, women exposed to information about legalizing prostitution reduced their stated support for regulated organ payments. We relate these findings to prior research and discuss implications for public policy.

Dataset Information

Multiple Openings and Competitiveness of Forward Markets: Experimental Evidence.

Publications

Multiple Openings and Competitiveness of Forward Markets: Experimental Evidence.

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