Should the Same Side of the Market always move first in a Transaction? An Experimental Study

This paper investigates whether transactions where the buyer (or the seller) always moves first, and the seller (or the buyer) always moves second in the exchange gives higher payoffs than exchanges in which it is randomly determined who moves first. We examine the effect of two treatment variables: Partners versus Strangers and fixed versus changing positions. We find that both with fixed and with changing positions, second movers take advantage of their position by exploiting the first mover by "not delivering" the demanded good. However, with fixed positions exploitation occurs significantly less while reciprocal exchanges happen more often. In spite of this, it turns out that with fixed positions payoffs are very unevenly distributed. Unequal payoff distributions occur both under Partners and Strangers, but they appear to be more extreme among Strangers.<BR>