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Static and Dynamic Quantity-Setting Games: an In-Class Experiment

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  • DomeNico Raguseo

Abstract

This paper illustrates the results of a case study on teaching economics issues employing an experiment where students were made to play quantity-setting games employing the Stackelberg and Cournot theory of oligopoly. A strictly theoretical approach to the study of the oligopolistic market structure is replaced by a discovery-learning method. The goal of the in-class experiment is both to illustrate to the students the economics theory trough a learning by doing approach and to allow the instructors to discover how students act when they have to develop their own strategies, placing them in a role similar to that of firms aiming to maximize the profits. The main finding shows how students converged toward the Nash-equilibrium quantity. Several firms or groups of students, who were producing high output level at the beginning of the game later on reduced their output since they realized that their profit could increase by just producing less. At the end of the experiment, students have emphasized that they have really learned what is like to interact in a market structure where firms can influence the market variables but not absolutely control them.

Suggested Citation

  • DomeNico Raguseo, 2010. "Static and Dynamic Quantity-Setting Games: an In-Class Experiment," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 165-175.
  • Handle: RePEc:bas:econst:y:2010:i:1:p:165-175
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    References listed on IDEAS

    as
    1. Hemenway, David & Moore, Robert L & Whitney, James, 1987. "The Oligopoly Game," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 727-730, October.
    2. Smith,Vernon L., 2005. "Bargaining and Market Behavior," Cambridge Books, Cambridge University Press, number 9780521021487, December.
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    More about this item

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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