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Cost Structures and Nash Play in Repeated Cournot Games

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  • Douglas Davis
  • Robert Reilly
  • Bart Wilson

Abstract

This paper reports an experiment designed to assess the effects of a rotation in the marginal cost curve on convergence in a repeated Cournot triopoly. Increasing the cost curve's slope both reduces the serially-undominated set to the Nash prediction, and increases the peakedness of earnings. We observe higher rates of Nash equilibrium play in the design with the steeper marginal cost schedule, but only when participants are also rematched after each decision. Examination of response patterns suggests that the treatment with a steeper marginal cost curve and with a re-matching of participants across periods induces the selection of Nash Consistent responses. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Douglas Davis & Robert Reilly & Bart Wilson, 2003. "Cost Structures and Nash Play in Repeated Cournot Games," Experimental Economics, Springer;Economic Science Association, vol. 6(2), pages 209-226, October.
  • Handle: RePEc:kap:expeco:v:6:y:2003:i:2:p:209-226
    DOI: 10.1023/A:1025361105730
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    References listed on IDEAS

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    1. 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.
    2. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
    3. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, vol. 60(4), pages 803-836, July.
    4. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
    5. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    6. Holt, Charles A, 1985. "An Experimental Test of the Consistent-Conjectures Hypothesis," American Economic Review, American Economic Association, vol. 75(3), pages 314-325, June.
    7. Davis, Douglas D., 2002. "Strategic interactions, market information and predicting the effects of mergers in differentiated product markets," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1277-1312, November.
    8. 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.
    9. Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
    10. R. D. Theocharis, 1960. "On the Stability of the Cournot Solution on the Oligopoly Problem," Review of Economic Studies, Oxford University Press, vol. 27(2), pages 133-134.
    11. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
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    Cited by:

    1. van Koten, Silvester & Ortmann, Andreas, 2013. "Structural versus behavioral remedies in the deregulation of electricity markets: An experimental investigation motivated by policy concerns," European Economic Review, Elsevier, vol. 64(C), pages 256-265.
    2. Douglas Davis & Oleg Korenok & Robert Reilly, 2009. "Re-matching, information and sequencing effects in posted offer markets," Experimental Economics, Springer;Economic Science Association, vol. 12(1), pages 65-86, March.
    3. Till Requate & Israel Waichman, 2011. "“A profit table or a profit calculator?” A note on the design of Cournot oligopoly experiments," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 36-46, March.
    4. Davis, Douglas D. & Wilson, Bart J., 2008. "Strategic buyers, horizontal mergers and synergies: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 643-661, May.

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