Costs of implementation: Bargaining costs versus allocative efficiency
Name
CostsofImplementation.pdf
Description
http://web.mit.edu/bwerner/www/papers/CostsofImplementation.pdf
Size
480.7 KB
Format
Adobe PDF
Checksum (MD5)
14307c7aac48f7e18e58c42a1b2d25c9
Author(s)
Maciejovsky, Boris
Wernerfelt, Birger
Date Issued
January 2011
Journal
Journal of Economic Behavior and Organization
Publisher
Elsevier
Citation
Maciejovsky, Boris, and Birger Wernerfelt. “Costs of Implementation: Bargaining Costs Versus Allocative Efficiency.” Journal of Economic Behavior & Organization 77, no. 3 (March 2011): 318–325.
Version
Author's final manuscript
Abstract
A mechanism with low direct cost of use may be preferred to alternatives implementing more efficient allocations. We show this experimentally by giving pairs of subjects the option to agree on a single average price for a sequence of trades—in effect pooling several small bargains into a larger one. We make pooling costly by tying it to some inefficient trades, but subjects nevertheless reveal strong tendencies to pool, particularly when more bargains remain to be struck and when bargaining is face to face. The results suggest that implementation costs could play a significant role in the use of many common trading practices.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-NonCommercial-NoDerivs License
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1016/j.jebo.2010.11.004
