Market Interaction and Efficient Cooperation

Abstract

We experimentally study causal effects of competitive market experience on efficiency levels attained in a subsequent social dilemma. We compare behavior of pairs of traders who have been market-winners with that of pairs who have been market- losers. We study both the cases where traders interacting in the social dilemma have competed with each other in the market before and where traders do not have a shared market experience. Shared market experience adversely affects efficiency in the social dilemma for both market-winner and market-loser pairs. Market-winners achieve higher efficiency levels in the social dilemma only if market experience is not shared.