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Adaptive Behavior By Single-Product And Multiproduct Price Setting Firms In Experimental Markets

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Author Info
Nikolaos Georgantzis () (Universitat Jaume I)
Aurora García Gallego () (Universitat Jaume I)

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Abstract

Using data obtained from experiments reported in García-Gallego (1998) and García- Gallego and Georgantzís (2001), we estimate a simple model of adaptive behavior which could describe pricing in a market whose demand conditions are unknown to the firms. Divergence between the limit of observed prices over time and theoretical predictions concerning multiproduct firms could be partially explained as a result of learning limitations associated with multiple task-oriented problem solving. However, optimal multiproduct pricing requires that subjects use two different kinds of rules: one concerning responses to prices charged by other players and another concerning pricing of own products. Even in a simple environment like the one studied here, subjects seem to be far more successful in learning a number than learning a rule.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2001-13.pdf
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File Function: Fisrt version / Primera version, 2001
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2001-13.

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Length: 41 pages
Date of creation: May 2001
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2001-13

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Related research
Keywords: Adaptive Learning; Experimental Oligopoly; Multiproduct Firms.;

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C9 - Mathematical and Quantitative Methods - - Design of Experiments
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

References listed on IDEAS
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  3. Garcia-Gallego, Aurora & Georgantzis, Nikolaos, 2001. "Multiproduct activity in an experimental differentiated oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 493-518, March. [Downloadable!] (restricted)
  4. Robson, Arthur J, 1986. "The Existence of Nash Equilibria in Reaction Functions for Dynamic Models of Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 539-44, October. [Downloadable!] (restricted)
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    Other versions:
  6. 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. [Downloadable!] (restricted)
  7. Rosemarie Nagel & Nicolaas J. Vriend, 1997. "An Experimental Study of Adaptive Behavior in an Oligopolistic Market Game," Economics Working Papers 230, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  8. Dawid, Herbert, 1997. "Learning of equilibria by a population with minimal information," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 1-18, January. [Downloadable!] (restricted)
  9. Friedman, James W, 1976. "Reaction Functions as Nash Equilibria," Review of Economic Studies, Blackwell Publishing, vol. 43(1), pages 83-90, February. [Downloadable!] (restricted)
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  11. Nagel, Rosemarie & Vriend, Nicolaas J, 1999. "Inexperienced and Experienced Players in an Oligopolistic Market Game with Minimal Information," Industrial and Corporate Change, Oxford University Press, vol. 8(1), pages 41-65, March.
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  14. Offerman, Theo & Sonnemans, Joep, 1998. "Learning by experience and learning by imitating successful others," Journal of Economic Behavior & Organization, Elsevier, vol. 34(4), pages 559-575, March. [Downloadable!] (restricted)
  15. Vriend, Nicolaas J., 2000. "An illustration of the essential difference between individual and social learning, and its consequences for computational analyses," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 1-19, January. [Downloadable!] (restricted)
  16. Garcia Gallego, Aurora, 1998. "Oligopoly experimentation of learning with simulated markets," Journal of Economic Behavior & Organization, Elsevier, vol. 35(3), pages 333-355, April. [Downloadable!] (restricted)
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  18. Ronald Harstad & Stephen Martin & Hans-Theo Normann, 1997. "Experimental Tests of Consciously Parallel Behaviour in Oligopoly," CIE Discussion Papers 1997-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
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