Transcript Slide 1

Squeezing Lemonade into Lemons
Bart Wilson
Artie Zillante
George Mason University
UNC Charlotte
July 1, 2007
Experimental Design
• Institution/Information treatment variables
– Institution: Bilateral bargaining vs. posted offer
– Information – posted offer sessions:
• Participants know all posted offers
• Sellers only see their private offers
• General session parameters
– 16 buyers, observe quality after purchase
– 4 sellers: 2 low quality, 2 high quality
(exogenous)
BB
1
BB
2
BB
3
BB
4
BB
5
PO
pu
b
PO lic1
pu
b
PO lic2
pu
b
PO lic3
pu
bl
ic
4
PO
pr
iv
PO ate
pr 1
iv
PO ate
pr 2
iv
PO ate
pr 3
iv
at
e4
Result 1: Market outcomes
16
14
Supers
Ripoffs
Regulars
12
10
8
6
4
2
0
BB
1
BB
2
BB
3
BB
4
BB
5
PO
pu
b
PO lic1
pu
b
PO lic2
pu
b
PO lic3
pu
bl
ic
4
PO
pr
iv
PO ate
pr 1
iv
PO ate
pr 2
iv
PO ate
pr 3
iv
at
e4
Result 2: Sales order
16
14
12
10
8
Regulars
Supers
6
4
2
0
PO
pu
b
PO
pu
b
PO
pu
b
lic
lic
lic
lic
4
3
2
1
at
e4
at
e3
at
e2
at
e1
PO
pu
b
PO
pr
iv
PO
pr
iv
PO
pr
iv
PO
pr
iv
Result 3: Forgone CS
25000
20000
15000
Super-Super
Regular-Super
10000
5000
0
PO
PO
PO
S ession
BB
5
4
3
2
1
400
BB
BB
BB
BB
pu
bl
ic
4
pu
bl
ic
3
pu
bl
ic
2
pu
bl
ic
1
pr
iv
at
e4
pr
iv
at
e3
pr
iv
at
e2
pr
iv
at
e1
PO
PO
PO
PO
PO
Earnings
Result 4: Earnings
Buyers
Super Sellers
Regular Sellers
350
300
250
200
150
100
50
0
PO
pu
b
PO
pu
b
lic
lic
lic
4
3
2
1
Regular
PO
pu
b
lic
at
e4
at
e3
at
e2
at
e1
Super
PO
pu
b
PO
pr
iv
PO
pr
iv
PO
pr
iv
PO
pr
iv
Result 5: Advertising
Blank
6000
5000
4000
3000
2000
1000
0
Conclusion
• Information matters
– Regular sellers in PO markets with public
information sell ripoffs almost exclusively
– Super seller earnings are near zero in PO
markets with public information
• Institution matters
– Bilateral bargaining allows super sellers to
make more than minimal profits
– Reduces the number of ripoffs