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Experimental Markets with Search Frictions and Network Externalities

Institution: VCEE

Funding agency: Norwegian Research Council (no. 212996/F10)

Amount: Eur 70’000

Project duration:  Jan. 2012 - Dec. 2015

Austrian Project team: J.-R. Tyran

Other teamleaders: Espen Moen

Short description:

We study two types of market institutions experimentally: Markets with search costs, and markets with network externalities. In markets with search costs the standard model provides fairly clear predictions about behavior. However, questions of bargaining power - and thus small group strategic interaction - are integral to search theories. A large body of experimental research shows large deviations from the equilibria of standard bargaining models. In markets with network externalities, the standard model offers less clear cut predictions. The ambiguity largely results from the absence of an accepted theory of equilibrium selection, and the fact that multiple equilibria are integral to markets with network externalities. In terms of lab behavior, markets with search costs and markets with network externalities fall between the optimism of anonymous, decentralized market behavior, and the pessimism of small group strategic interaction. It makes these markets both demanding and interesting to study.

Vienna Center for Experimental Economics

Office (for all correspondence):
Department of Economics
Oskar-Morgenstern-Platz 1, 5th floor
A-1090 Vienna

Laboratory (for experiments):
Spitalgasse 2, Hof 1, 1.1 (Campus)
A-1090 Vienna

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