Laboratory market experiments are used to estimate the incidence of a stylized subsidy in factor market negotiations with university student and agricultural professional subjects. In separate sessions with both groups, prices converged approximately four and a half tokens higher when a 20-token per-unit subsidy was paid to buyers; this equates to 44% of the predicted 10-token split. A proportional market incentive treatment clarifies this subsidy effect. Discrepancies between predicted and observed incidence are similar to previous empirical estimates of subsidy incidence in agricultural land rental markets. A behavioral anomaly as well as buyer-buyer market competition may contribute to experimental results.

No abstract

No abstract

No abstract

"Laboratory markets are created to capture the important features of agricultural commodity markets. Sellers make production decisions and hold inventories before goods are sold. In a posted-bid auction environment, price supports create a moral hazard for sellers. Part of the price-support subsidy is transferred to buyers in the form of lower prices, which are close to those predicted by the buyers' Cournot level. The subsidy program is expensive for this reason. Lump-sum payments correct the moral hazard problem and are better at transferring income to sellers. However, transfers made at the beginning of each production period cause a decline in production levels." ("JEL" D44, C92) Copyright (c) 2009 Western Economic Association International.