Unraveling Results from Comparable Demand and Supply: An Experimental Investigation
Markets sometimes unravel, with offers becoming inefficiently early. Often this is attributed to competition arising from an imbalance of demand and supply, typically excess demand for workers. However this presents a puzzle, since unraveling can only occur when firms are willing to make early offers and workers are willing to accept them. We present a model and experiment in which workers' quality becomes known only in the late part of the market. However, in equilibrium, matching can occur (inefficiently) early only when there is comparable demand and supply: a surplus of applicants, but a shortage of high quality applicants.
The preliminary version of this study reporting pilot experiments and the latest version were presented at the ESA Meetings in Pittsburgh and Tucson, at the Winter ES Meeting in Philadelphia, and at NYU. We thank the participants for comments. Of course, all possible errors are our own responsibility. We used the Z-Tree software (Fischbacher, 2007) in our experiment. We would like to gratefully acknowledge the support of the NSF. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Muriel Niederle & Alvin E. Roth & M. Utku Ãnver, 2013. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Games, MDPI, Open Access Journal, vol. 4(2), pages 243-282, June. citation courtesy of