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Satisficing in sales competition: experimental evidence

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  • Siegfried Berninghaus

    ()

  • Werner G?th

    ()

  • M. Vittoria Levati

    ()

  • Jianying Qiu

    ()

Abstract

In a duopoly market, aspiration levels express how much sellers want to earn given their expectations about the other?s behavior. We augment the sellers? decision task by eliciting their profit aspiration. In a first experimental phase, whenever satisficing is not possible, sales choices, point beliefs, or aspiration levels have to be adapted. This allows us to investigate which of these three aspects individuals revise more often. In a second phase, testing the absorption of satisficing, participants are free to select non-satisficing sales profiles. The results reveal that most participants are satisficers who tend to adjust aspiration levels if they cannot be satisfied.

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Bibliographic Info

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-14.

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Length: 41
Date of creation: May 2009
Date of revision:
Handle: RePEc:inn:wpaper:2009-14

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Keywords: Satisficing behavior; Duopoly; Profit aspiration; Theory absorption;

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References

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  1. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 631-639, May.
  2. Napel, Stefan, 2003. "Aspiration adaptation in the ultimatum minigame," Games and Economic Behavior, Elsevier, Elsevier, vol. 43(1), pages 86-106, April.
  3. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 63(5), pages 1161-80, September.
  4. Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, American Economic Association, vol. 69(4), pages 493-513, September.
  5. Werner Güth & Hartmut Kliemt, 2004. "Bounded Rationality and Theory Absorption," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2004-27, Max Planck Institute of Economics, Strategic Interaction Group.
  6. Youngse Kim, 1999. "Satisficing and optimality in 2þ2 common interest games," Economic Theory, Springer, Springer, vol. 13(2), pages 365-375.
  7. Kim, Youngse, 2002. "Satisficing and fairness in ultimatum bargaining game experiments," Risk, Decision and Policy, Cambridge University Press, Cambridge University Press, vol. 7(03), pages 235-247, December.
  8. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2001. "Stackelberg Beats Cournot: On Collusion and Efficiency in Experimental Markets," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(474), pages 749-65, October.
  9. Bendor Jonathan & Mookherjee Dilip & Ray Debraj, 2001. "Reinforcement Learning in Repeated Interaction Games," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 1(1), pages 1-44, March.
  10. Werner Güth & Gerlinde Fellner & Ev Martin, 2006. "Satisficing or Optimizing? - An Experimental Study," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2006-11, Max Planck Institute of Economics, Strategic Interaction Group.
  11. Lilly, Gregory, 1994. "Bounded rationality : A Simon-like explication," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(1), pages 205-230, January.
  12. Werner Güth & M. Vittoria Levati & Matteo Ploner, 2006. "Is Satisficing Absorbable? - An Experimental Study," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2006-10, Max Planck Institute of Economics, Strategic Interaction Group.
  13. Gerlinde Fellner & Werner Güth & Boris Maciejovsky, 2005. "Satisficing in Financial Decision Making A Theoretical and Experimental Attempt to Explore Bounded Rationality," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2005-23, Max Planck Institute of Economics, Strategic Interaction Group.
  14. Holt, Charles A, 1985. "An Experimental Test of the Consistent-Conjectures Hypothesis," American Economic Review, American Economic Association, American Economic Association, vol. 75(3), pages 314-25, June.
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Citations

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Cited by:
  1. Güth, Werner & Vittoria Levati, M. & Ploner, Matteo, 2010. "Satisficing in strategic environments: A theoretical approach and experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 39(5), pages 554-561, October.
  2. Blanco, Mariana & Engelmann, Dirk & Koch, Alexander K. & Normann, Hans-Theo, 2008. "Belief Elicitation in Experiments: Is there a Hedging Problem?," IZA Discussion Papers 3517, Institute for the Study of Labor (IZA).
  3. Werner Güth, 2007. "A Non-Bayesian Approach to (Un)Bounded Rationality," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2007-035, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Werner Güth, 2009. "Optimal gelaufen, einfach zufrieden oder unüberlegt gehandelt? Zur Theorie (un)eingeschränkt rationalen Entscheidens," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 10(s1), pages 75-100, 05.

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