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Capacity choices and price competition in experimental markets

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  • Anderhub, Vital
  • Güth, Werner
  • Kamecke, Ulrich
  • Normann, Hans-Theo

Abstract

In the heterogeneous experimental oligopoly markets of this paper, sellers first choose capacities and then prices. In equilibrium, capacities should correspond to the Cournot prediction. In the experimental data, given capacities, observed price setting behavior is in general consistent with the theory. Capacities converge above the Cournot level. Sellers rarely manage to cooperate. --

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Paper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 2001,10.

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Date of creation: 2001
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Handle: RePEc:zbw:sfb373:200110

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  1. Rees, Ray, 1993. "Collusive Equilibrium in the Great Salt Duopoly," Munich Reprints in Economics, University of Munich, Department of Economics 3413, University of Munich, Department of Economics.
  2. Brown-Kruse, Jamie, et al, 1994. "Bertrand-Edgeworth Competition in Experimental Markets," Econometrica, Econometric Society, Econometric Society, vol. 62(2), pages 343-72, March.
  3. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," Industrial Organization, EconWPA 9803004, EconWPA.
  4. Stephen Martin, 1999. "Kreps And Scheinkman With Product Differentiation: An Expository Note," CIE Discussion Papers, University of Copenhagen. Department of Economics. Centre for Industrial Economics 1999-11, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
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  6. Reinhard Selten, 1998. "Multistage Game Models and Delay Supergames," Theory and Decision, Springer, Springer, vol. 44(1), pages 1-36, January.
  7. Davis, Douglas D., 1999. "Advance production and Cournot outcomes: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 40(1), pages 59-79, September.
  8. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 53(4), pages 435-446, April.
  9. Boccard, Nicolas & Wauthy, Xavier, 2000. "Bertrand competition and Cournot outcomes: further results," Economics Letters, Elsevier, Elsevier, vol. 68(3), pages 279-285, September.
  10. Dufwenberg, Martin & Gneezy, Uri, 1998. "Price Competition and Market Concentration: An Experimental Study," Working Paper Series, Uppsala University, Department of Economics 1998:8, Uppsala University, Department of Economics.
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  12. Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-96, Autumn.
  13. Yin, Xiangkang & Ng, Yew-Kwang, 1997. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes: A Case with Product Differentiation," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 36(68), pages 14-22, June.
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  15. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1997. "Learning in Cournot Oligopoly - An Experiment," Game Theory and Information, EconWPA 9707009, EconWPA, revised 22 Jul 1997.
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Citations

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Cited by:
  1. David Goodwin & Stuart Mestelman, 2003. "Advance Production Duopolies and Posted Prices or Market-Clearing Prices," McMaster Experimental Economics Laboratory Publications, McMaster University 2003-04, McMaster University.
  2. Le Coq, Chloé & Sturluson, Jon Thor, 2012. "Does opponents’ experience matter? Experimental evidence from a quantity precommitment game," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 84(1), pages 265-277.
  3. Fonseca, Miguel A. & Normann, Hans-Theo, 2012. "Excess capacity and pricing in Bertrand-Edgeworth markets: Experimental evidence," DICE Discussion Papers 67, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Andreas Nicklisch, 2012. "Does collusive advertising facilitate collusive pricing? Evidence from experimental duopolies," European Journal of Law and Economics, Springer, Springer, vol. 34(3), pages 515-532, December.
  5. Andreas Nicklisch, 2008. "Semi-collusive advertising and pricing in experimental duopolies," Working Paper Series of the Max Planck Institute for Research on Collective Goods, Max Planck Institute for Research on Collective Goods 2008_25, Max Planck Institute for Research on Collective Goods.
  6. Dean V. Williamson & Céline Jullien & Lynne Kiesling & Carine Staropoli, 2006. "Investment Incentives and Market Power: An Experimental Analysis," EAG Discussions Papers, Department of Justice, Antitrust Division 200605, Department of Justice, Antitrust Division.
  7. Oechssler, Jorg & Schuhmacher, Frank, 2004. "The limited liability effect in experimental duopoly markets," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(2), pages 163-184, February.
  8. Goodwin, David & Mestelman, Stuart, 2010. "A note comparing the capacity setting performance of the Kreps-Scheinkman duopoly model with the Cournot duopoly model in a laboratory setting," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 28(5), pages 522-525, September.
  9. Sandra Güth & Werner Güth, 2000. "Preemption in Capacity and Price Determination - A Study of Endogenous Timing of Decisions for Homogeneous Markets," CESifo Working Paper Series 309, CESifo Group Munich.

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