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What Model Best Describes Initial Choices in a Cournot Duopoly Experiment?

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  • Mariano Gabriel Runco

    (Economics Department, Auburn University at Montgomery, Montgomery, AL, USA)

Abstract

This paper tests empirically four models of bounded rationality using data from first responses in a Cournot duopoly experiment. Specifically, the models considered are Level-k, Quantal Response Equilibrium, Noisy Introspection and Logit Cognitive Hierarchy. It is found that the Level-k model (with proportions of Level-0, Level-1 and Level-8 given by 68.5%, 13.2% and 18.3% respectively) provides the best fit in terms of Log-Likelihood and BIC. Moreover, the robustness of our findings is corroborated analyzing subsets of the original data.

Suggested Citation

  • Mariano Gabriel Runco, 2016. "What Model Best Describes Initial Choices in a Cournot Duopoly Experiment?," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 5(2), pages 31-45, April.
    • Handle: RePEc:igg:jabe00:v:5:y:2016:i:2:p:31-45
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