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Cost Structures and Nash Play in Repeated Cournot Games

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  • Douglas Davis
  • Robert Reilly
  • Bart Wilson

Abstract

This paper reports an experiment designed to assess the effects of a rotation in the marginal cost curve on convergence in a repeated Cournot triopoly. Increasing the cost curve's slope both reduces the serially-undominated set to the Nash prediction, and increases the peakedness of earnings. We observe higher rates of Nash equilibrium play in the design with the steeper marginal cost schedule, but only when participants are also rematched after each decision. Examination of response patterns suggests that the treatment with a steeper marginal cost curve and with a re-matching of participants across periods induces the selection of Nash Consistent responses. Copyright Kluwer Academic Publishers 2003

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File URL: http://hdl.handle.net/10.1023/A:1025361105730
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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 6 (2003)
Issue (Month): 2 (October)
Pages: 209-226

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Handle: RePEc:kap:expeco:v:6:y:2003:i:2:p:209-226

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Web page: http://www.springerlink.com/link.asp?id=102888

Related research

Keywords: experimental economics; Cournot competition; serially undominated equilibria;

References

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  1. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, Econometric Society, vol. 60(4), pages 803-36, July.
  2. Davis, Douglas D., 1999. "Advance production and Cournot outcomes: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 59-79, September.
  3. Holt, Charles A, 1985. "An Experimental Test of the Consistent-Conjectures Hypothesis," American Economic Review, American Economic Association, vol. 75(3), pages 314-25, June.
  4. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 514, David K. Levine.
  5. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
  6. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1997. "Learning in Cournot Oligopoly - An Experiment," Game Theory and Information, EconWPA 9707009, EconWPA, revised 22 Jul 1997.
  7. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Rassenti, Stephen & Reynolds, Stanley S. & Smith, Vernon L. & Szidarovszky, Ferenc, 2000. "Adaptation and convergence of behavior in repeated experimental Cournot games," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 117-146, February.
  9. Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
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Citations

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Cited by:
  1. Till Requate & Israel Waichman, 2011. "“A profit table or a profit calculator?” A note on the design of Cournot oligopoly experiments," Experimental Economics, Springer, Springer, vol. 14(1), pages 36-46, March.
  2. Silvester Van Koten & Andreas Ortmann, 2011. "Structural versus Behavioral Remedies in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns," CERGE-EI Working Papers wp437, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  3. Douglas Davis & Oleg Korenok & Robert Reilly, 2009. "Re-matching, information and sequencing effects in posted offer markets," Experimental Economics, Springer, Springer, vol. 12(1), pages 65-86, March.
  4. Douglas D. Davis & Bart J. Wilson, 2006. "Strategic Buyers, Horizontal Mergers and Synergies: An Experimental Investigation," Working Papers 0601, VCU School of Business, Department of Economics.

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