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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)

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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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Publisher Info
Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek in its series Jena Economic Research Papers in Economics 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;

Find related papers by JEL classification:
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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