Does the Fundamental Transformation Deter Trade? An Experiment
Autor: | Engel, Christoph, Helland, Eric |
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Rok vydání: | 2022 |
Předmět: |
Williamson
B21 - Microeconomics L14 - Transactional Relationships Contracts and Reputation Networks K12 - Contract Law L12 - Monopoly Monopolization Strategies FOS: Law Fundamental Transformation C91 - Laboratory Individual Behavior Social and Behavioral Sciences Oliver Williamson windfall profit Experiment sunk cost let down aversion C91 ddc:330 L12 L14 fundamental transformation K12 D43 - Oligopoly and Other Forms of Market Imperfection bilateral monopoly Empirical Analysis [D22 - Firm Behavior] B21 Law D43 exploitation D22 |
DOI: | 10.17605/osf.io/53zyn |
Popis: | Oliver Williamson has coined the term "fundamental transformation". It captures the following situation: before they strike a deal, buyer and seller are protected by competition. Yet thereafter they find themselves in a bilateral monopoly. With common knowledge of standard preferences, both sides conclude the contract regardless if its expected value exceeds their outside options. We run an experiment to test whether additional behavioral reasons deter mutually beneficial trade. If the risk materializes, another individual makes a windfall profit. She does so by intentionally exploiting the first individual. The first individual is let down, although she has knowingly exposed herself to this risk. Participants sell the opportunity to enter the contractual relationship at a price below its expected value. This effect is driven by risk aversion, and already present if the risk is stochastic. Behavioral effects are heterogeneous. About a quarter of participants exhibit the hypothesized additional deterrent effect. |
Databáze: | OpenAIRE |
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