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Stability of the Cournot process - experimental evidence

  • Steffen Huck

    (Department of Economics & ELSE, University College London, Gower Street, London WC1E 6BT, UK)

  • Hans-Theo Normann

    ()

    (Department of Economics, Royal Holloway, University of London, Egham, Surrey, TW20, 0EX, U.K.)

  • Jörg Oechssler

    (Department of Economics, University of Bonn, Adenauerallee 24, 53113 Bonn, Germany)

We report results of experiments designed to test the predictions of the best-reply process. In a Cournot oligopoly with four firms, the best-reply process should theoretically explode if demand and cost functions are linear. We find, however, no experimental evidence of such instability. Moreover, we find no differences between a market which theoretically should not converge to Nash equilibrium and one which should converge because of inertia. We investigate the power of several learning dynamics to explain this unpredicted stability.

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Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 31 (2002)
Issue (Month): 1 ()
Pages: 123-136

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Handle: RePEc:spr:jogath:v:31:y:2002:i:1:p:123-136
Note: Received May 1997/Revised June 2002
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  1. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  2. 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.
  3. 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.
  4. Holt, Charles A, 1985. "An Experimental Test of the Consistent-Conjectures Hypothesis," American Economic Review, American Economic Association, vol. 75(3), pages 314-25, June.
  5. Cox, James C. & Walker, Mark, 1998. "Learning to play Cournot duopoly strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 141-161, August.
  6. Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
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