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Multiple openings of forward markets: experimental evidence

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  • José Luis Ferreira
  • Praveen Kujal
  • Stephen Rassenti

Abstract

We test the strategic motive to sell forward in experimental Cournot duopoly and quadropoly environments with multiple forward markets. Using random matching, we test two versions of forward markets with finite (Allaz and Vila, 1993) and indefinite number of periods. We find that the results for the Allaz and Vila (1993) model are remarkably close to the predicted theoretical results for both duopolies and quadropolies. We then test a version of the model to allow for indefinitely many periods. There are multiple equilibria in this theoretical model, including both the competitive and collusive outcomes. We find that the initial "collusive hypothesis" is not ratified, and that outcomes are nearly competitive. Sales take place mostly in the first few openings of futures markets. Again, these results hold for both duopolies and quadropolies.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1023.

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Date of creation: Oct 2010
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Handle: RePEc:cte:werepe:we1023

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Cited by:
  1. Silvester van Koten & Andreas Ortmann, 2011. "Structural versus Behavioral Measures in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns," RSCAS Working Papers, European University Institute 2011/07, European University Institute.
  2. Schubert, Jens, 2013. "The Impact of Forward Trading on Tacit Collusion: Experimental Evidence," MPRA Paper 43768, University Library of Munich, Germany.

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