Price increasing competition? Experimental evidence
AbstractEconomic intuition suggests competition lowers prices. However, recent theoretical work reveals a monopolist may prefer to charge a lower price than a seller facing a competitor with a differentiated product depending upon the joint distribution of buyer values for the products. We explore this relationship using controlled laboratory experiments. Our results indicate price increasing competition is rare due in part to overly intense competition, but after controlling for such behavioral reactions, we find some support for the model. We also explore pricing dynamics and find that sellers are more sensitive to their rivals when buyer values are positively correlated.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 84 (2012)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/jebo
Product differentiation; Pricing dynamics; Market structure; Experiments;
Other versions of this item:
- Cary Deck & Jingping Gu, 2010. "Price Increasing Competition? Experimental Evidence," Working Papers 10-19, Chapman University, Economic Science Institute.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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