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Information and Learning in Oligopoly: an Experiment

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  • M. Bigoni
  • M. Fort

Abstract

This paper presents an experiment on learning in repeated games, which complements the analysis of players' actual choices with data on the information acquisition process they follow. Subjects play a repeated Cournot oligopoly, with limited a priori information. The econometrics hinges on a model built upon Experience Weighted Attraction learning, and the simultaneous analysis of data on the information gathered and on actions taken by the subjects. Results suggest that learning is a composite process, in which different components coexist. Adaptive learning emerges as the leading element, but when subjects look at the strategies individually adopted by their competitors they tend to imitate the most successful behavior, which makes markets more competitive. Reinforcement learning also plays a role, as subjects favor strategies that have yielded higher profits in the past.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp860.

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Date of creation: Jan 2013
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Handle: RePEc:bol:bodewp:wp860

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Citations

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Cited by:
  1. Mark Armstrong & Steffen Huck, 2010. "Behavioral Economics as Applied to Firms: A Primer," CESifo Working Paper Series, CESifo Group Munich 2937, CESifo Group Munich.
  2. Bigoni, Maria & Fort, Margherita, 2013. "Information and Learning in Oligopoly: An Experiment," IZA Discussion Papers 7125, Institute for the Study of Labor (IZA).
  3. Buckert, Magdalena & Oechssler, Jörg & Schwieren, Christiane, 2014. "Imitation under stress," Working Papers, University of Heidelberg, Department of Economics 0556, University of Heidelberg, Department of Economics.
  4. Nikolas Tsakas, 2013. "Diffusion by Imitation: The Importance of Targeting Agents," 2013 Papers, Job Market Papers pts99, Job Market Papers.

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