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Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust

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Author Info

  • Jose Apesteguia
  • Steffen Huck
  • Jörg Oechssler
  • Simon Weidenholzer

Abstract

A well-known result by Vega-Redondo (1997) implies that in symmetric Cournot oligopoly, imitation leads to the Walrasian outcome where price equals marginal cost. In this paper, we show that this result is not robust to the slightest asymmetry in fixed costs. Instead of obtaining the Walrasian outcome as unique prediction, every outcome where agents choose identical actions will be played some fraction of the time in the long run. We then conduct experiments to check this fragility. We obtain that, contrary to the theoretical prediction, the Walrasian outcome is still a good predictor of behavior.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2224.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2224

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Keywords: evolutionary game theory; stochastic stability; imitation; Cournot markets; information; experiments; simulations;

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References

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  1. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1997. "Learning in Cournot Oligopoly - An Experiment," Game Theory and Information 9707009, EconWPA, revised 22 Jul 1997.
  2. Offerman, Theo & Potters, Jan & Sonnemans, Joep, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 973-97, October.
  3. Yasuhito Tanaka, 1999. "Long run equilibria in an asymmetric oligopoly," Economic Theory, Springer, vol. 14(3), pages 705-715.
  4. Jose Apesteguia & Steffen Huck & Jorg Oechssler, 2004. "Imitation - Theory and Experimental Evidence," Levine's Bibliography 122247000000000132, UCLA Department of Economics.
  5. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
  6. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January.
  7. Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
  8. Abbink, Klaus & Brandts, Jordi, 2008. "24. Pricing in Bertrand competition with increasing marginal costs," Games and Economic Behavior, Elsevier, vol. 63(1), pages 1-31, May.
  9. Selten, Reinhard & Apesteguia, Jose, 2005. "Experimentally observed imitation and cooperation in price competition on the circle," Games and Economic Behavior, Elsevier, vol. 51(1), pages 171-192, April.
  10. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
  11. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  12. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
  13. K. Schlag, 2010. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Levine's Working Paper Archive 454, David K. Levine.
  14. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
  15. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  16. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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Citations

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Cited by:
  1. Bigoni, Maria & Fort, Margherita, 2013. "Information and Learning in Oligopoly: An Experiment," IZA Discussion Papers 7125, Institute for the Study of Labor (IZA).
  2. Duersch, Peter & Oechssler, Jörg & Schipper, Burkhard C., 2012. "Unbeatable imitation," Games and Economic Behavior, Elsevier, vol. 76(1), pages 88-96.
  3. Daniel Friedman & Steffen Huck & Ryan Oprea & Simon Weidenholzer, 2012. "From Imitation to Collusion: Long-run Learning in a Low-Information Environment," Levine's Working Paper Archive 786969000000000457, David K. Levine.
  4. Nikos Nikiforakis, 2008. "Feedback; Punishment and Cooperation in Public Good Experiments," Department of Economics - Working Papers Series 1036, The University of Melbourne.
  5. Peter Duersch & Jörg Oechssler & Burkhard Schipper, 2014. "When is tit-for-tat unbeatable?," International Journal of Game Theory, Springer, vol. 43(1), pages 25-36, February.
  6. Fallucchi, Francesco & Renner, Elke & Sefton, Martin, 2013. "Information feedback and contest structure in rent-seeking games," European Economic Review, Elsevier, vol. 64(C), pages 223-240.
  7. Buckert, Magdalena & Oechssler, Jörg & Schwieren, Christiane, 2014. "Imitation under stress," Working Papers 0556, University of Heidelberg, Department of Economics.
  8. van Veldhuizen, Roel & Sonnemans, Joep, 2014. "Nonrenewable resources, strategic behavior and the hotelling rule: An experiment," Discussion Papers, Research Unit: Market Behavior SP II 2014-203, Social Science Research Center Berlin (WZB).
  9. Peter Duersch & Joerg Oechssler & Burkhard Schipper, 2011. "Once Beaten, Never Again: Imitation in Two-Player Potential Games," Working Papers 1112, University of California, Davis, Department of Economics.

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