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An experiment on supply function competition

  • Bolle, Friedel
  • Grimm, Veronika
  • Ockenfels, Axel
  • del Pozo, Xavier

We experimentally investigate key predictions of supply function equilibrium. While, overall, equilibrium organizes bidding behavior well, we observe three important deviations. First, bidding is sensitive to theoretically irrelevant changes of the demand distribution. Second, in a market with symmetric firms we observe tacit collusion in that firms provide less than the predicted quantities. Third, in a market with asymmetric capacities, the larger firm bids more competitively than predicted, while the smaller firms still provide less than equilibrium quantities.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 63 (2013)
Issue (Month): C ()
Pages: 170-185

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Handle: RePEc:eee:eecrev:v:63:y:2013:i:c:p:170-185
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  15. Crawford, Gregory S. & Crespo, Joseph & Tauchen, Helen, 2007. "Bidding asymmetries in multi-unit auctions: Implications of bid function equilibria in the British spot market for electricity," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1233-1268, December.
  16. Aleksandr Rudkevich & Max Duckworth & Richard Rosen, 1998. "Modeling Electricity Pricing in a Deregulated Generation Industry: The Potential for Oligopoly Pricing in a Poolco," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 19-48.
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