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  Information exchange in laboratory markets: competition, transfer costs, and the emergence of reputation

Hoffmann, R., Kittel, B., Larsen, M. (2021): Information exchange in laboratory markets: competition, transfer costs, and the emergence of reputation. - Experimental Economics, 24, 1, 118-142.
https://doi.org/10.1007/s10683-020-09652-0

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Item Permalink: https://publications.pik-potsdam.de/pubman/item/item_24348 Version Permalink: https://publications.pik-potsdam.de/pubman/item/item_24348_6
Genre: Journal Article

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 Creators:
Hoffmann, Roman1, Author              
Kittel, Bernhard2, Author
Larsen, Mattias2, Author
Affiliations:
1Potsdam Institute for Climate Impact Research, ou_persistent13              
2External Organizations, ou_persistent22              

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 Abstract: Public reputation mechanisms are an effective means to limit opportunistic behav-ior in markets suffering from moral hazard problems. While previous research was mostly concerned with the influence of exogenous feedback mechanisms, this study considers the endogenous emergence of reputation through deliberate information sharing among actors and the role of barriers in hindering information exchange. Using a repeated investment game, we analyze the effects of competition and trans-fer costs on players’ willingness to share information with each other. While trans-fer costs are a direct cost of the information exchange, competition costs represent an indirect cost that arises when the transfer of valuable information to competitors comes at the loss of a competitive advantage. We show that barriers to informa-tion exchange not only affect the behavior of the senders of information, but also affect the ones about whom the information is shared. While the possibility of shar-ing information about others significantly improves trust and market efficiency, both competition and direct transfer costs diminish the positive effect by substantially reducing the level of information exchange. Players about whom the information is shared anticipate and react to the changes in the costs by behaving more or less cooperatively. For reputation building, an environment is needed that fosters the sharing of information. Reciprocity is key to understanding information exchange. Even when it is costly, information sharing is used as a way to sanction others.

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 Dates: 2020-03-112020-04-102021-03-24
 Publication Status: Finally published
 Pages: -
 Publishing info: -
 Table of Contents: -
 Rev. Type: Peer
 Identifiers: PIKDOMAIN: FutureLab - Social Metabolism and Impacts
MDB-ID: yes - 3041
DOI: 10.1007/s10683-020-09652-0
Organisational keyword: FutureLab - Social Metabolism and Impacts
Research topic keyword: Economics
Research topic keyword: Policy Advice
Regional keyword: Europe
Model / method: Open Source Software
Model / method: Nonlinear Data Analysis
Model / method: Decision Theory
Model / method: Game Theory
 Degree: -

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Title: Experimental Economics
Source Genre: Journal, SCI, Scopus
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Pages: - Volume / Issue: 24 (1) Sequence Number: - Start / End Page: 118 - 142 Identifier: Other: 1573-6938
ISSN: 1386-4157
CoNE: https://publications.pik-potsdam.de/cone/journals/resource/experimental-economics
Publisher: Springer