CeDEx Seminar - Theo Offerman (University of Amsterdam)

Morals in multi-unit markets

Abstract: Markets may erode morals, measured by decreased concerns of traders for a third party (Falk & Szech, 2013). So far, this has been studied in markets where participants are restricted to trade single units. In doing so, some market forces which may contribute to selfish outcomes have been neglected, such as the replacement logic and a market selection effect, where the least moral traders determine quantities. In a laboratory experiment, we compare markets with single-unit trading to markets where multiple units can be traded. We find that, in contrast to single-unit markets, multi-unit market outcomes are statistically indistinguishable from purely self-interested competitive equilibrium. Especially the replacement logic drives this finding, as, when this market force is active, 83% of subjects engage in trading when a pair of traders shares 0.20€ while inflicting damages of 1.50€ to UNICEF, whereas only 16% of subjects do so in single-unit markets.