Competing Against Simulated Equilibrium Price Dispersions: An Experiment On Internet-Assisted Search Markets
AbstractIn a four-treatment experiment, we test some of the hypotheses in García-Gallego et al. (2004) concerning competition among a number of firms of which some (or all) are indexed by a price-comparison engine facilitating buyers’ search process. In this paper, we isolate individual behavior from noise due to other players’ actions and learning, facing each subject with simulated rivals whose prices are extracted from mixed strategy equilibrium distributions. We find systematic deviations from both theoretical distributions and previous data obtained in sessions where all players were human. Specifically, departures of experimental data from the corresponding theoretical predictions are enhanced in this setting as compared to our previous research in which all agents were represented by human players. This suggests that the divergence between theoretical and observed price reported there should not be attributed to noisy learning and strategic uncertainty due to subjects’ interaction with other players. Furthermore, economic tests on players’ risk attitudes organize pricing behavior in meaningful, although not always compatible, ways.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 05-12.
Length: 30 pages
Date of creation: Oct 2005
Date of revision:
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Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-26 (All new papers)
- NEP-CBE-2006-08-26 (Cognitive & Behavioural Economics)
- NEP-EXP-2006-08-26 (Experimental Economics)
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