An experiment on supply function competition
AbstractWe experimentally investigate key predictions of supply function equilibrium. While, overall, equilibrium organizes bidding behavior well, we observe three important deviations. First, bidding is sensitive to theoretically irrelevant changes of the demand distribution. Second, in a market with symmetric firms we observe tacit collusion in that firms provide less than the predicted quantities. Third, in a market with asymmetric capacities, the larger firm bids more competitively than predicted, while the smaller firms still provide less than equilibrium quantities.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 63 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/eer
Supply function competition; Experiment; Demand uncertainty; Asymmetric firms;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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