Steve Tadelis - Working Papers


Sequential Bargaining in the Field: Evidence from Millions of Online Bargaining Interactions

(with Matt Backus, Tom Blake and Brad Larsen), March 2018

ABSTRACT

We study patterns of behavior in bilateral bargaining situations using a rich, new dataset describing over 88 million listings from eBay's Best Offer platform, with back-and-forth bargaining occurring in over 25 million of these listings. We document patterns of behavior and relate them to "rational" and "psychological" theories of bargaining and find that bargaining patterns are consistent with elements of both approaches. Most notably, players with more bargaining strength typically receive better outcomes, and players exhibit equitable behavior by making offers that split-the-difference between negotiating positions. We are publicly releasing this new dataset to support additional empirical bargaining research. JEL classifications: C78, D82, D83, M21

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Expectation, Disappointment, and Exit: Evidence on Reference Point Formation from an Online Marketplace

(with Matt Backus, Tom Blake and Dimitriy Masterov), March 2017

ABSTRACT

We study expectation-based reference point formation using data from ascending auctions in an online marketplace. Our model formalizes the hypothesis that a disappointment-averse bidder who spends more time in the lead prior to a sudden loss will suffer a higher degree of disappointment. We find that for every additional day in the lead, bidders who lose abruptly are 6 percentage points more likely to exit the marketplace. In contrast, for losing bidders whose expectations are informed by higher competing bids, there is no effect. Also consistent with our model of platform exit, more experienced bidders show less sensitivity to disappointment. JEL classifications: D03, D47, D83

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The Response of Consumer Spending to Changes in Gasoline Prices

(with Michael Gelman, Yuriy Gorodnichenko, Shachar Kariv, Dmitri Koustas, Matthew D. Shapiro and Dan Silverman), September 2016

ABSTRACT

This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of the sudden, large drop in gasoline prices in 2014 for identification. This estimation strategy is implemented using comprehensive, daily transaction-level data for a large panel of individuals. The estimated marginal propensity to consume (MPC) is approximately one, a higher estimate than estimates found in less comprehensive or well-measured data. This estimate takes into account the elasticity of demand for gasoline and potential slow adjustment to changes in prices. The high MPC implies that changes in gasoline prices have large aggregate effects. JEL classifications: D12, D91, E21, H31

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Buying Reputation as a Signal of Quality: Evidence from an Online Marketplace

(with Lingfang (Ivy) Li and Xiaolan Zhou), August 2016

ABSTRACT

Reputation is critical to foster trust in online marketplaces, yet leaving feedback is a public good that can be under-provided unless buyers are rewarded for it. Signaling theory implies that only high quality sellers would reward buyers for truthful feedback. We explore this scope for signaling using Taobao's \reward-for-feedback" mechanism and find that items with rewards generate sales that are nearly 30% higher and are sold by higher quality sellers. The market design implication is that marketplaces can benefit from allowing sellers to use rewards to build reputations and signal their high quality in the process. JEL classifications: D47, D82, L15, L86 

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The Limits of Reputation in Platform Markets: An Empirical Analysis and Field Experiment

(with Chris Nosko), January 2015

ABSTRACT

Reputation mechanisms used by platform markets suffer from two problems. First, buyers may draw conclusions about the quality of the platform from single transactions, causing a reputational externality. Second, reputation measures may be coarse or biased, preventing buyers from making proper inferences. We document these problems using eBay data and claim that platforms can benefit from identifying and promoting higher quality sellers. Using an unobservable measure of seller quality we demonstrate the benefits of our approach through a large-scale controlled experiment. Highlighting the importance of reputational externalities, we chart an agenda that aims to create more realistic models of platform markets. JEL classifications: D47, D82, L15, L21, L86 

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The Power of Shame and the Rationality of Trust

March 2011

ABSTRACT

A mounting number of studies suggest that individuals are not selfish, which perhaps explains the prevalence of trust among strangers. Models of players who care about their opponents' payoffs have been used to rationalize these facts. An alternative motive is that players care directly about how they are perceived by others. I propose and implement an experimental design that distinguishes perception motives from payoff motives. Participants not only exhibit concerns for perception, but they seem strategically rational by anticipating the change in behavior of their opponents. The approach can explain previously documented behaviors, both in the lab and in the field, and can shed light on some determinants of trust. JEL classifications C72, C91, D03, D82

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