Tax Incidence

According to economic theory, the incidence of a unit tax is independent of the statutory assignment of the liability to pay the tax. However, the theory is silent on the possible effects of market institutions on tax incidence. We report data from an experiment designed to address two questions. Is tax incidence independent of the assignment of the liability to pay tax to sellers or to buyers? Is tax incidence independent of market institutions? We conduct laboratory experiments with double auction (DA) and posted offer (PO) markets. Based on the results of nonparametric and parametric tests of prices generated by laboratory markets, we conclude that the answer to both questions is “no.” We report that observed differences from liability-side equivalence are statistically significant and economically meaningful. We also report that the incidence of the same tax differs between DA and PO markets with the same demand and supply schedules.

Determination of Odds in Prediction Markets: Coexistence of Posted-offer and Double-auction Designs

This paper studies the coexistence of two competing mechanisms in the same market, where one follows the posted-offer rule and the other one incorporates a double-auction mechanism. We explore this coexistence within a sports betting example in which bettors are free to choose between a bookie (posted-offer market) and a betting exchange. Our findings imply that i) bettors' risk aversion parameter is instrumental in whether these two mechanisms coexist or not, ii) most bettors are strictly better off, and none is worse off, when they have access to both of these competing mechanisms rather than just one, and iii) these results hold even when we allow the bookie to make a positive profit instead of following a zero expected profit pricing rule.

Market Transparency in Business-to-Business e-Commerce

Market transparency refers to the level of current trade information revealed to participants by market makers. This paper analyzes the effect of market transparency on the outcomes of posted-offer style Business-to-Business e-commerce markets. First, increasing market transparency improves the price-tracking ability of sellers, and results in higher efficiency. However, revelation of quantity information on transactions is not very crucial as opposed to price information. Second, although sellers extract significantly higher surplus (profit) than buyers can do in a posted-offer market, the difference vanishes with increasing market transparency. Lastly, sellers in posted-offer markets respond poorly to external demand shocks. Interestingly, the poor price-tracking performance of sellers hurts buyers more. In other words, seller profits are much less sensitive to demand shocks as compared to buyer surpluses.

Market Transparency in Business-to-Business e-Commerce

Market transparency refers to the level of current trade information revealed to participants by market makers. This paper analyzes the effect of market transparency on the outcomes of posted-offer style Business-to-Business e-commerce markets. First, increasing market transparency improves the price-tracking ability of sellers, and results in higher efficiency. However, revelation of quantity information on transactions is not very crucial as opposed to price information. Second, although sellers extract significantly higher surplus (profit) than buyers can do in a posted-offer market, the difference vanishes with increasing market transparency. Lastly, sellers in posted-offer markets respond poorly to external demand shocks. Interestingly, the poor price-tracking performance of sellers hurts buyers more. In other words, seller profits are much less sensitive to demand shocks as compared to buyer surpluses.

Towards Efficient Trust Aware E-Marketplace Frameworks

In the liberalized and deregulated e-marketplace some key factors for service providers’ success are the following. First, the efficiency with which services will be developed. Second, the quality level, in relation with the corresponding cost, of new services. Third, service providers’ reliability with respect to service provisioning. Fourth, the efficiency with which the services will be operated (controlled, maintained, administered, etc.). The aim of this paper is, in accordance with efficient service operation objectives, to propose enhancements to the sophistication of the negotiation functionality that can be offered by e-commerce systems in open competitive communications environments. In the highly competitive and dynamic emarketplaces, Service/Product Requestors (SPRs) should be provided with mechanisms that enable them to find and associate with the most appropriate Service/Product Providers (SPPs), i.e., those offering the desirable quality of service / product at a certain time period, in a cost efficient manner. Such mechanisms may entail a wide variety of negotiation mechanisms, including auctions, bilateral (1 to 1) and/or multilateral (M to N) negotiation models and strategies, as well as posted offer schemes (i.e., a nonnegotiable, take-it-or-leave-it offer) in order to establish the ‘best’ possible contract terms and conditions with respect to service / product access and provision.