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Two are few and four are many: number effects in experimental oligopolies

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  • Huck, Steffen
  • Normann, Hans-Theo
  • Oechssler, Jorg

Abstract

In this paper we investigate how the competitiveness of Cournot markets varies with the number of firms in an industry. We review previous Cournot experiments in the literature. Additionally, we conduct a new series of experiments studying oligopolies with two, three, four, and five firms in a unified frame. With two firms we find some collusion. Three-firm oligopolies tend to produce outputs at the Nash level. Markets with four or five firms are never collusive and typically settle at or above the Cournot outcome. Some of those markets are actually quite competitive with outputs close to the Walrasian outcome.
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  • Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April.
  • Handle: RePEc:eee:jeborg:v:53:y:2004:i:4:p:435-446
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    More about this item

    JEL classification:

    • 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

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