Markets and Norms

Heinrich H. Nax, Barbara Ikica, and Simon Jantschgi

In collaboration with Bary Pradelski, Dimitrios Moustakas (Grenoble)

Abstract

The project’s goal is to contribute to a better understanding of the role that societal norms play in determining human behaviour and outcomes on economic markets. Combining theoretical and empirical analyses, and drawing from economic and sociological theory, we shall investigate how markets evolve, and how stability and “equilibrium” of markets depend on the evolution of social norms as held by the market participants. Particular attention is paid to online markets, where buyers and sellers interact frequently and anonymously. These markets differ crucially from conventional markets, such as classical labor markets or traditional retail and goods exchanges, as they are typically more anonymous, more decentralized and larger. Through an improved understanding of how norms affect such online markets, with the goal of enhancing welfare, the project aims to leverage this understanding to develop a framework for identifying social norm interventions as complements to conventional market interventions. The endorsed PI's aim is to help build fair and stable online markets.

The project is both theoretical and experimental, where controlled laboratory and online experiments performed on an own experimental trading software that is able to handle large number of repeated real-time interactions. Specifically, the project aims to understand how bidding strategies and social norms guiding them depend on available information and feedback in the market. Research output will both improve the micro-foundations of the classical market literature, complement existing knowledge about (labor) markets from behavioral economics, and improve the state of the art of social norm interventions as applied to markets. Research output will likely be publishable in high-impact general interest and field journals. The experimental platform will be integrated with major experimental platforms and distributed in the scientific community.