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Satisficing and prior-free optimality in price competition: a theoretical and experimental analysis

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Author Info

  • Werner Güth

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

  • M. Vittoria Levatia

    ()
    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

  • Matteo Ploner

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany; University of Trento, Italy)

Abstract

On a heterogeneous experimental oligopoly market, sellers choose a price, specify a set-valued prior-free conjecture about the others' behavior, and form their own profit-aspiration for each element of their conjecture. We formally define the concepts of satisficing and prior-free optimality and check if seller participants behave in accordance with them. We find that seller participants are satisficers, but fail to be "prior-free" optimal.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-067.

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Date of creation: 09 Sep 2008
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Handle: RePEc:jrp:jrpwrp:2008-067

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Related research

Keywords: Satisficing behavior; Bounded rationality; Triopoly;

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Cited by:
  1. Werner Güth & M. Vittoria Levati & Matteo Ploner, 2008. "Satisficing in strategic environments: a theoretical approach and experimental evidence," Jena Economic Research Papers 2008-078, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Siegfried Berninghaus & Werner Güth & M. Levati & Jianying Qiu, 2011. "Satisficing search versus aspiration adaptation in sales competition: experimental evidence," International Journal of Game Theory, Springer, vol. 40(1), pages 179-198, February.

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