Showing posts with label transaction cost. Show all posts
Showing posts with label transaction cost. Show all posts
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Behavioral Monkeynomics

Tuesday, September 8, 2009

First of all, a hat tip to my Canadian friend who referred me to this article at Science Daily: "Monkeys Follow Economic Rules Of Supply And Demand".

C├ęcile Fruteau placed food containers with highly-desired pieces of apple in two groups of South African vervet monkeys. For the monkeys there was just one problem: only one in each group could open the food container. This monkey had a low position in the rank order and was therefore scarcely groomed. However, as soon as she acquired the power to hand out apples she was valued more and was groomed a lot by the rest of the group. Yet she could only enjoy that privilege briefly; the researchers placed a second food container that could be opened by another low-ranking female. From that moment onwards the market value of the first monkey was halved, and she was therefore groomed half as often.

Lessons for mankind:
  1. Its not how you look, but whether you have apples or not
  2. Male (monkeys) are materialistic. No gender question here
  3. Beware of your competitors!

This one is most surprising:

A change in price - grooming for less long if there is another monkey that supplies apples - is only possible if a negotiation process takes place. Many economists assume that such negotiations can only take place if they are concluded with a contract. However, the vervet monkeys do not have the possibility to conclude such binding contracts and yet they still succeed in agreeing to a change in price for a service.

We, humans, should be ashamed of this fact. Monkey market can be very efficient even without a contract. Look at how their 'informal institution' can streamline transaction cost. No need for complicated regulations, monkeys can agree to reach amicable settlement that would bring welfare to their kind. If this were human, they would have to conclude a contract which will take sleepless nights no negotiate, pay a lot of money to the lawyers, file a claim to the court, bribe the judges, and in the end of the day, no one gets the apple.