Pre-play communication in Cournot competition: An experiment with students and managers
AbstractThis study investigates the impact of pre-play communication on the outcomes in Cournot duopoly and triopoly experiments, using both students and managers as subjects. Communication is implemented by two different devices, a 'standardized-communication' and a free-communication device. We find that the effect of communication on collusion is larger in duopoly than in triopoly. Moreover, managers behave in a similar way under the two communication devices, while students are more influenced by the free-communication than by the standardized-communication device. In addition, managers select lower aggregate quantities than students, and communication enhances the difference between the subject pools in duopoly but reduces this difference in triopoly. Inspecting individual behavior, in all treatments the output adjustment is significantly correlated with the previous round's best response strategy. In the treatments with communication, the effect of imitation becomes larger and crowds out the effect of myopic best response. Finally, in all treatments duopoly results in more collusion than triopoly. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2010,09.
Date of creation: 2010
Date of revision:
artefactual field experiment; subject pools; Cournot oligopoly; managers; cheap talk;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- 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
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
- NEP-COM-2010-11-20 (Industrial Competition)
- NEP-EXP-2010-11-20 (Experimental Economics)
- NEP-IND-2010-11-20 (Industrial Organization)
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