Let the Market Decide: An Experimental Study of Competition and Fairness

Arbeitspapier

Is competition perceived as a fair procedure? We report data from laboratory experiments where a powerful buyer can trade with one of several sellers. Sellers who feel shortchanged can engage in counterproductive behavior to punish the buyer. We find that the same unfavorable terms of trade trigger significantly less punishment if the buyer uses a competitive auction to determine the terms of trade than if she uses her authority to dictate the same terms directly. Our results inform the debate on the fairness of market outcomes by showing that the use of a competitive procedure can, by itself, affect how people judge unequal distributive outcomes.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4831

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement
• Subject: competition ; authority ; markets ; fairness ; responsibility ; procedures

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bartling, Björn ; Grieder, Manuel ; Zehnder, Christian
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/102107
• Last update: 10.03.2025, 11:41 AM CET