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Social learning in market games

  • Altavilla, Carlo
  • Luini, Luigi
  • Sbriglia, Patrizia

The aim of our experiments is to test the effect of different information settings on firms’ behaviour in duopoly price and quantity games. We find that, when players have full information on their rivals’ choices, the imitation rule prevails and such learning behaviour induces more competitive outcomes in the Cournot market designs. By the same token, when information on the average industrial profit is provided, there is evidence of an increase in cooperation, and the majority of players experiment with new strategies when their payoff falls below the average profit (F. Palomino and F. Vega-Redondo, 1999; H. Dixon, 2000)

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 61 (2006)
Issue (Month): 4 (December)
Pages: 632-652

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Handle: RePEc:eee:jeborg:v:61:y:2006:i:4:p:632-652
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  1. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Through Trial & Error to Collusion," Game Theory and Information 9811004, EconWPA, revised 24 Nov 1998.
  2. Offerman, Theo & Potters, Jan & Sonnemans, Joep, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 973-97, October.
  3. Oechssler, Jorg, 2002. "Cooperation as a result of learning with aspiration levels," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 405-409, November.
  4. Nagel, Rosemarie & Nicolaas J. Vriend, 1997. "An Experimental Study of Adaptive Behavior in an Oligopolistic Market Game," Discussion Paper Serie B 408, University of Bonn, Germany.
  5. Herbert Simon, 1956. "A comparison of game theory and learning theory," Psychometrika, Springer, vol. 21(3), pages 267-272, September.
  6. Paolo LUPI & Patrizia SBRIGLIA, 2003. "Exploring Human Behaviour and Learning in Experimental Cournot Settings," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 111(3), pages 373-395.
  7. Antoni Bosch-Domènech & Nicolaas J. Vriend, 1998. "Imitation of succesful behavior in Cournot markets," Economics Working Papers 269, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  8. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
  9. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," Industrial Organization 9803004, EconWPA.
  10. Alos-Ferrer, Carlos, 2004. "Cournot versus Walras in dynamic oligopolies with memory," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 193-217, February.
  11. Karandikar, Rajeeva & Mookherjee, Dilip & Ray, Debraj & Vega-Redondo, Fernando, 1998. "Evolving Aspirations and Cooperation," Journal of Economic Theory, Elsevier, vol. 80(2), pages 292-331, June.
  12. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  13. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  14. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages C80-95, March.
  15. Fernando Vega-Redondo & Frédéric Palomino, 1999. "Convergence of aspirations and (partial) cooperation in the prisoner's dilemma," International Journal of Game Theory, Springer, vol. 28(4), pages 465-488.
  16. 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.
  17. Dixon, Huw David, 2000. "Keeping up with the Joneses: competition and the evolution of collusion," Journal of Economic Behavior & Organization, Elsevier, vol. 43(2), pages 223-238, October.
  18. Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2000. "Trial & Error to Collusion - The Discrete Case," Bonn Econ Discussion Papers bgse6_2000, University of Bonn, Germany.
  19. James D. Hamilton & Baldev Raj, 2002. "New directions in business cycle research and financial analysis," Empirical Economics, Springer, vol. 27(2), pages 149-162.
  20. Dixon, Huw David & Wallis, Steven & Moss, Scott, 2002. "Axelrod Meets Cournot: Oligopoly and the Evolutionary Metaphor," Computational Economics, Society for Computational Economics, vol. 20(3), pages 139-56, December.
  21. Luigi Luini & Carlo Altavilla & Patrizia Sbriglia, 2003. "Information and Learning in Bertrand and Cournot Experimental Duopolies," Department of Economics University of Siena 406, Department of Economics, University of Siena.
  22. Schaffer, Mark E., 1989. "Are profit-maximisers the best survivors? : A Darwinian model of economic natural selection," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 29-45, August.
  23. Dixon, Huw D. & Sbriglia, Patrizia & Somma, Ernesto, 2006. "Learning to collude: An experiment in convergence and equilibrium selection in oligopoly," Research in Economics, Elsevier, vol. 60(3), pages 155-167, September.
  24. Rassenti, Stephen & Reynolds, Stanley S. & Smith, Vernon L. & Szidarovszky, Ferenc, 2000. "Adaptation and convergence of behavior in repeated experimental Cournot games," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 117-146, February.
  25. Erev, Ido & Roth, Alvin E, 1998. "Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, American Economic Association, vol. 88(4), pages 848-81, September.
  26. Schenk-Hoppe, Klaus Reiner, 2000. "The evolution of Walrasian behavior in oligopolies," Journal of Mathematical Economics, Elsevier, vol. 33(1), pages 35-55, February.
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