Behavioral convergence properties of Cournot and Bertrand markets: An experimental analysis
AbstractThis paper reports an experiment that examines the relative convergence properties of differentiated-product Cournot and Bertrand oligopolies. Overall, Bertrand markets tend to converge to Nash equilibrium predictions more quickly and more completely than Cournot markets. Further, when products are close substitutes Bertrand markets respond more quickly to an announced nominal shock. As products become weaker substitutes, however, an increased tendency for tacit collusion degrades convergence in Bertrand markets. This effect is particularly pronounced following a nominal shock. Our results suggest that in an oligopoly context variations in decision error costs dominate a ‘Strategic Substitutes Effect’ isolated in previous experimental research.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 80 (2011)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/jebo
Experiments; Strategic substitutes and strategic complements; Bertrand and Cournot markets;
Other versions of this item:
- Douglas D. Davis, 2008. "Behavioral Convergence Properties of Cournot and Bertrand Markets: An Experimental Analysis," Working Papers 0808, VCU School of Business, Department of Economics, revised Jan 2011.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D4 - Microeconomics - - Market Structure and Pricing
- L4 - Industrial Organization - - Antitrust Issues and Policies
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