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A note comparing the capacity setting performance of the Kreps-Scheinkman duopoly model with the Cournot duopoly model in a laboratory setting

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  • Goodwin, David
  • Mestelman, Stuart

Abstract

The paper reports the results of 39 laboratory duopoly markets for which pricing institution and participant experience are treatments. Cournot (C) duopolies (quantity precommitment and a price determined to clear the market) are contrasted with Kreps-Scheinkman (KS) duopolies (quantity precommitment and posted prices). Inexperienced participants in KS markets have much more difficulty selecting capacities consistent with the theoretical predictions than do those in C markets. With experience, the differences disappear.

Suggested Citation

  • 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, vol. 28(5), pages 522-525, September.
  • Handle: RePEc:eee:indorg:v:28:y:2010:i:5:p:522-525
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    References listed on IDEAS

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    1. Vital Anderhub & Werner Güth & Ulrich Kamecke & Hans-Theo Normann, 2003. "Capacity Choices and Price Competition in Experimental Markets," Experimental Economics, Springer;Economic Science Association, vol. 6(1), pages 27-52, June.
    2. Muren, Astri, 2000. "Quantity precommitment in an experimental oligopoly market," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 147-157, February.
    3. Yin, Xiangkang & Ng, Yew-Kwang, 1997. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes: A Case with Product Differentiation," Australian Economic Papers, Wiley Blackwell, vol. 36(68), pages 14-22, June.
    4. Sigrid Suetens & Jan Potters, 2007. "Bertrand colludes more than Cournot," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 71-77, March.
    5. Boccard, Nicolas & Wauthy, Xavier, 2000. "Bertrand competition and Cournot outcomes: further results," Economics Letters, Elsevier, vol. 68(3), pages 279-285, September.
    6. Davis, Douglas D., 1999. "Advance production and Cournot outcomes: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 59-79, September.
    7. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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    Citations

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    Cited by:

    1. Kyle Hampton & Katerina Sherstyuk, 2010. "Demand Shocks, Capacity Coordination and Industry Performance: Lessons from Economic Laboratory," Working Papers 201023, University of Hawaii at Manoa, Department of Economics.
    2. Jacobs, Martin & Requate, Till, 2016. "Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence," Economics Working Papers 2016-01, Christian-Albrechts-University of Kiel, Department of Economics.
    3. Jacobs, Martin, 2016. "Number of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets," Economics Working Papers 2016-02, Christian-Albrechts-University of Kiel, Department of Economics.
    4. HIGASHIDA Keisaku, 2018. "Subsidies to Public Firms and Competition Modes under a Mixed Duopoly," Discussion papers 18001, Research Institute of Economy, Trade and Industry (RIETI).
    5. Jacobs Martin, 2016. "Number of Firms, Rationing, Matching, and Knowledge: A Comprehensive Study of Variations in Experimental Kreps–Scheinkman Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1273-1319, September.
    6. Orland, Andreas & Selten, Reinhard, 2016. "Buyer power in bilateral oligopolies with advance production: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 122(C), pages 31-42.

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