Buyer and Seller Effect Disentangled
Buyer and seller behavior were disentangled by reselling goods in a double auction market.
Certain markets (e.g. stock and commodity markets) have two prices : a selling price and buying price. Much literature on finance is concerned with interpreting the economic meaning of the difference between these prices, usually called bid-ask spread. Is this price differential caused (or motivated) by different opinions, different information, or different risk attitudes?
A number of exprerimental studies on market behavior have analysed the phenomenon of buying prices substantially below (i.e. more than can be accounted for by income effect) selling prices. Willingness to pay (WTP) and willingness to accept (WTA) compensation are the two measures of the value a person places on something. In the absence of transaction costs these two measures should differ only by an income effect, which in the laboratory case is negligable.
KeywordsReservation Price Seller Price Competitive Equilibrium Transaction Price Double Auction
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