IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v51y2005i1p171-192.html
   My bibliography  Save this article

Experimentally observed imitation and cooperation in price competition on the circle

Author

Listed:
  • Selten, Reinhard
  • Apesteguia, Jose

Abstract

This paper reports an experiment on a location game, the so-called "Price-Competition on the Circle." There are n symmetric firms equidistantly located on a circle. Consumers are uniformly distributed. Each consumer buys one and only one unit from that firm whose price, including the cost of transportation, is the lowest, provided such a price is below a maximum willingness to pay. Experiments, extended over 200 periods, were run with 3, 4, and 5 participants. Subjects did not receive any information about the relationship between prices and profits, but they received feedback on prices and profits of two neighbors after each period. The evaluation compares predictions derived from imitation equilibrium (Selten and Ostmann 2001) and Cournot equilibrium, as well as symmetric joint-profit maximization. The results qualitatively favor imitation equilibrium, as long as no cooperation is observed.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Selten, Reinhard & Apesteguia, Jose, 2005. "Experimentally observed imitation and cooperation in price competition on the circle," Games and Economic Behavior, Elsevier, vol. 51(1), pages 171-192, April.
  • Handle: RePEc:eee:gamebe:v:51:y:2005:i:1:p:171-192
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899-8256(04)00069-7
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 136(1), pages 217-235, September.
    2. Schlag, Karl H., 1999. "Which one should I imitate?," Journal of Mathematical Economics, Elsevier, vol. 31(4), pages 493-522, May.
    3. Isaac, R. Mark & Walker, James M., 1985. "Information and conspiracy in sealed bid auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 6(2), pages 139-159, June.
    4. F. T. Dolbear & L. B. Lave & G. Bowman & A. Lieberman & E. Prescott & F. Rueter & R. Sherman, 1968. "Collusion in Oligopoly: An Experiment on the Effect of Numbers and Information," The Quarterly Journal of Economics, Oxford University Press, vol. 82(2), pages 240-259.
    5. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    6. Ilan Eshel & Larry Samuelson & Avner Shaked, "undated". "Altruists Egoists and Hooligans in a Local Interaction Model," ELSE working papers 005, ESRC Centre on Economics Learning and Social Evolution.
    7. Klaus Abbink & Jordi Brandts, 2005. "Price Competition Under Cost Uncertainty: A Laboratory Analysis," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 636-648, July.
    8. Eshel, Ilan & Samuelson, Larry & Shaked, Avner, 1998. "Altruists, Egoists, and Hooligans in a Local Interaction Model," American Economic Review, American Economic Association, vol. 88(1), pages 157-179, March.
    9. Dufwenberg, Martin & Gneezy, Uri, 2000. "Price competition and market concentration: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 7-22, January.
    10. Dufwenberg, Martin & Gneezy, Uri, 2002. "Information disclosure in auctions: an experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 431-444, August.
    11. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January.
    12. Rhode, Paul & Stegeman, Mark, 2001. "Non-Nash equilibria of Darwinian dynamics with applications to duopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 415-453, March.
    13. Antoni Bosch-DomËnech & Nicolaas J. Vriend, 2003. "Imitation of successful behaviour in cournot markets," Economic Journal, Royal Economic Society, vol. 113(487), pages 495-524, April.
    14. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January.
    15. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
    16. Theo Offerman & Jan Potters & Joep Sonnemans, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 973-997.
    17. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
    18. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    19. Abbink, Klaus & Brandts, Jordi, 2008. "24. Pricing in Bertrand competition with increasing marginal costs," Games and Economic Behavior, Elsevier, vol. 63(1), pages 1-31, May.
    20. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    21. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 2004. "Through Trial and Error to Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 205-224, February.
    22. Fernando Vega-Redondo, 1999. "Markets under bounded rationality: from theory to facts," Investigaciones Economicas, Fundación SEPI, vol. 23(1), pages 3-26, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mark Armstrong & Steffen Huck, 2010. "Behavioral Economics as Applied to Firms: A Primer," CESifo Working Paper Series 2937, CESifo.
    2. Abbink, Klaus & Brandts, Jordi, 2008. "24. Pricing in Bertrand competition with increasing marginal costs," Games and Economic Behavior, Elsevier, vol. 63(1), pages 1-31, May.
    3. Jan Potters & Sigrid Suetens, 2013. "Oligopoly Experiments In The Current Millennium," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 439-460, July.
    4. Friedman, Daniel & Huck, Steffen & Oprea, Ryan & Weidenholzer, Simon, 2015. "From imitation to collusion: Long-run learning in a low-information environment," Journal of Economic Theory, Elsevier, vol. 155(C), pages 185-205.
    5. Klaus Abbink & Jordi Brandts, 2002. "24," UFAE and IAE Working Papers 523.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
      • Jordi Brandts & Klaus Abbink, 2004. "24," Levine's Bibliography 122247000000000073, UCLA Department of Economics.
    6. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 136(1), pages 217-235, September.
    7. Robert S. Gazzale, 2009. "Learning to Play Nash from the Best," Department of Economics Working Papers 2009-03, Department of Economics, Williams College.
    8. Apesteguia, Jose & Huck, Steffen & Oechssler, Jörg & Weidenholzer, Simon, 2010. "Imitation and the evolution of Walrasian behavior: Theoretically fragile but behaviorally robust," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1603-1617, September.
    9. Kirchkamp, Oliver & Nagel, Rosemarie, 2007. "Naive learning and cooperation in network experiments," Games and Economic Behavior, Elsevier, vol. 58(2), pages 269-292, February.
    10. Altavilla, Carlo & Luini, Luigi & Sbriglia, Patrizia, 2006. "Social learning in market games," Journal of Economic Behavior & Organization, Elsevier, vol. 61(4), pages 632-652, December.
    11. Alós-Ferrer, Carlos & Ritschel, Alexander, 2021. "Multiple behavioral rules in Cournot oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 250-267.
    12. Offerman, Theo & Schotter, Andrew, 2009. "Imitation and luck: An experimental study on social sampling," Games and Economic Behavior, Elsevier, vol. 65(2), pages 461-502, March.
    13. Nikiforakis, Nikos, 2010. "Feedback, punishment and cooperation in public good experiments," Games and Economic Behavior, Elsevier, vol. 68(2), pages 689-702, March.
    14. Jonas Hedlund, 2015. "Imitation in Cournot oligopolies with multiple markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(3), pages 567-587, November.
    15. Carlos Alós-Ferrer & Johannes Buckenmaier & Georg Kirchsteiger, 2022. "Do traders learn to select efficient market institutions?," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 203-228, February.
    16. Tsakas, Nikolas, 2012. "Naive learning in social networks: Imitating the most successful neighbor," MPRA Paper 37796, University Library of Munich, Germany.
    17. Alós-Ferrer, Carlos & Weidenholzer, Simon, 2014. "Imitation and the role of information in overcoming coordination failures," Games and Economic Behavior, Elsevier, vol. 87(C), pages 397-411.
    18. Bigoni, Maria, 2010. "What do you want to know? Information acquisition and learning in experimental Cournot games," Research in Economics, Elsevier, vol. 64(1), pages 1-17, March.
    19. Tsakas Nikolas, 2014. "Imitating the Most Successful Neighbor in Social Networks," Review of Network Economics, De Gruyter, vol. 12(4), pages 1-33, February.
    20. Bigoni, Maria & Fort, Margherita, 2013. "Information and learning in oligopoly: An experiment," Games and Economic Behavior, Elsevier, vol. 81(C), pages 192-214.

    More about this item

    JEL classification:

    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:51:y:2005:i:1:p:171-192. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.