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From imitation to collusion: Long-run learning in a low-information environment

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  • Friedman, Daniel
  • Huck, Steffen
  • Oprea, Ryan
  • Weidenholzer, Simon

Abstract

We explore the stability of imitation in a 1,200-period experimental Cournot game where subjects do not know the payoff function but see the output quantities and payoffs of each oligopolist after every period. In line with theoretical predictions and previous experimental findings, our oligopolies reach highly competitive levels within 50 periods. However, already after 100 periods quantities start to drop and, eventually fall deep into collusive territory without pausing at the Nash equilibrium. Our results demonstrate how groups of subjects can learn their way out of dysfunctional heuristics, and thus suggest the need for a new theory of how cooperation emerges. -- Wir untersuchen die Stabilität von Imitationsverhalten in einem experimentellen Cournot-Oligopol mit 1.200 Perioden, in denen die Teilnehmer zwar keine Informationen über die Gewinnfunktion haben, aber nach jeder Periode die Output-Mengen und den Gewinn jedes Oligopolisten sehen können. Im Einklang mit theoretischen Vorhersagen und Befunden vorheriger Experimente, erreichen unsere Oligopole hoch-kompetitive Levels innerhalb von 50 Perioden. Aber bereits nach 100 Perioden fangen die Output-Mengen an zu fallen, im weiteren Verlauf sogar bis tief in kollusive Bereiche, ohne am Nash-Gleichgewicht zu pausieren. Unsere Befunde veranschaulichen, wie Gruppen von Personen ihren Weg aus dysfunktionalen Heuristiken heraus finden können, und legen daher die Notwendigkeit einer neuen Theorie über die Entstehung von Kooperation nahe.

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Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economics of Change with number SP II 2012-301.

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Date of creation: 2012
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Handle: RePEc:zbw:wzbeoc:spii2012301

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Keywords: Cournot oligopoly; imitation; learning dynamics; cooperation;

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References

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  1. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, Elsevier, vol. 136(1), pages 217-235, September.
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  3. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers, ESRC Centre on Economics Learning and Social Evolution 028, ESRC Centre on Economics Learning and Social Evolution.
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  7. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(5), pages 841-77, October.
  8. Jose Apesteguia & Steffen Huck & Jörg Oechssler & Simon Weidenholzer, 2008. "Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust," CESifo Working Paper Series 2224, CESifo Group Munich.
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Cited by:
  1. Joseph E. Harrington, Jr & Roberto Hernan-Gonzalez & Praveen Kujal, 2013. "The Relative Efficacy of Price Announcements and Express Communication for Collusion: Experimental Findings," Working Papers, Chapman University, Economic Science Institute 13-30, Chapman University, Economic Science Institute.
  2. Bigoni, Maria & Fort, Margherita, 2013. "Information and Learning in Oligopoly: An Experiment," IZA Discussion Papers 7125, Institute for the Study of Labor (IZA).
  3. repec:hal:wpaper:hal-00817201 is not listed on IDEAS

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