Pablo Guillen

Collusion and Fights in an Experiment with Price-Setting Firms and Production in Advance ∗

We present results from 50-round market experiments in which firms decide repeatedly both on price and quantity of a completely perishable good. Each firm has capacity to serve the whole market. The stage game does not have an equilibrium in pure strategies. We run experiments for markets with two and three identical firms. Firms tend to cooperate to avoid fights, but when they fight bankruptcies are rather frequent. On average, pricing behavior is closer to that for pure quantity than for pure price competition and price and efficiency levels are higher for two than for three firms. Consumer surplus increases with the number of firms, but unsold production leads to higher efficiency losses with more firms. Over time prices tend to the highest possible one for markets both with two and three firms.

Matching Markets with Mixed Ownership: The Case for A Real-life Assignment Mechanism

We consider a common indivisible good allocation problem in which agents have both social and private endowments. Popular applications include student assignment to on-campus housing, kidney exchange, and particular school choice problems. In a series of experiments Chen and Sonmez (American Economic Review 92: 1669-1686, 2002) have shown that a popular mechanism from recent theory, the Top Trading Cycles (TTC) mechanism, induces a significantly higher participation rate by agents with private endowments and leads to significantly more efficient outcomes than the most commonly used real-life mechanism, the Random Serial Dictatorship with Squatting Rights.We first show that a particular mechanism, the so-called New House 4 (NH4) mechanism, which has been in use at MIT since the 1980s, is in fact outcome-equivalent to a natural adaptation of the well-known Gale-Shapley mechanism of two-sided matching theory. This implies that the NH4 mechanism is the most efficient mechanism within the class of fair and individually rational mechanisms, and that it is essentially the only incentive compatible mechanism satisfying the two properties. We then experimentally compare NH4 and TTC. We find that under NH4, the participation rate is significantly higher than under TTC. We also propose a new efficiency test based on ordinal preference information and show that NH4 also outperforms TTC in terms of efficiency.

A new solution for the moral hazard problem in team production

We propose an intergroup competition scheme (ICS) to theoretically solve free riding in team production and provide experimental evidence from a voluntary contribution mechanism public goods game. The ICS includes an internal transfer payment from the lowest to highest contributing team proportional to the difference in group contributions. The ICS requires minimal information, makes the efficient contribution a dominant strategy, and is budget balanced. These features make the ICS ideally suited to solve the moral hazard problem in team production. Our experiment demonstrates that the ICS raises contributions to almost reach optimality with the appropriate parameters. We also show experimentally that the success of the ICS can be primarily attributed to the effect of higher returns and to the introduction of competition, and it is not due to the introduction of potential losses or information regarding other groups. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1922...

Fairness in the Social Regulation of Labor Markets: Reasons for Hope?

Abstract Over the past thirty years the spread of neoliberal ideology has put collective mechanisms for the social regulation of labor markets under severe stress. On the other hand, social norms of fairness, particularly with regard to rewards for work, are very strong. We argue that neoliberal practices have spread less widely and deeply than is commonly imagined. We use ICTWSS data for 34 OECD countries to construct an index of corporatism for each country and a cross-national average for countries in each of six welfare models. Over the period 1960–2010 corporatism declines dramatically in Anglo-Saxon countries but converges to the Continental European mean for the three main groups of European countries. This circumstantial evidence suggests that norms of fairness in the social regulation of labor markets are at least resilient to the encroachment of neoliberal labor market practices.