Learning and Noisy Equilibrium Behavior in an Experimental Study of Imperfect Price Competition
We consider a duopoly pricing game with a unique Bertrand-Nash equilibrium. The high-price firm has a nonvanishing market share, however, and intuition suggests that observed prices may be positively related to this market share. This relationship is implied by a model in which players make noisy (logit) best responses to expected payoff differences. The resulting logit equilibrium model was used to design an experiment in which the high-price firm's market share varies. The model accurately predicts the final-period price averages. A naive learning model predicts the observed differences in the time paths of average prices. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 43 (2002)
Issue (Month): 3 (August)
|Contact details of provider:|| Postal: |
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
- Rosenthal, Robert W, 1989. "A Bounded-Rationality Approach to the Study of Noncooperative Games," International Journal of Game Theory, Springer, vol. 18(3), pages 273-91.
- Cooper, David J & Garvin, Susan & Kagel, John H, 1997. "Adaptive Learning vs. Equilibrium Refinements in an Entry Limit Pricing Game," Economic Journal, Royal Economic Society, vol. 107(442), pages 553-75, May.
- Cheung, Yin-Wong & Friedman, Daniel, 1997. "Individual Learning in Normal Form Games: Some Laboratory Results," Games and Economic Behavior, Elsevier, vol. 19(1), pages 46-76, April.
- Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
- Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 2002.
"The Logit Equilibrium: A Perspective on Intuitive Behavioral Anomalies,"
Southern Economic Journal,
Southern Economic Association, vol. 69(1), pages 21-47, July.
- Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1999. "The Logit Equilibrium: A Perspective on Intuitive Behavioral Anomalies," Virginia Economics Online Papers 332, University of Virginia, Department of Economics.
- Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-20, September.
- Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1999. "Stochastic Game Theory: Adjustment to Equilibrium Under Noisy Directional Learning," Virginia Economics Online Papers 327, University of Virginia, Department of Economics.
- 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.
- Yan Chen & Fang-Fang Tang, 1998. "Learning and Incentive-Compatible Mechanisms for Public Goods Provision: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 633-662, June.
- Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
- Radner, Roy, 1980. "Collusive behavior in noncooperative epsilon-equilibria of oligopolies with long but finite lives," Journal of Economic Theory, Elsevier, vol. 22(2), pages 136-154, April.
- 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.
- C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
- Charles A. Holt & David T. Scheffman, 1987. "Facilitating Practices: The Effects of Advance Notice and Best-Price Policies," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 187-197, Summer.
- Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:43:y:2002:i:3:p:613-636. 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: (Wiley-Blackwell Digital Licensing)or ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.