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Stability of the Cournot process - experimental evidence

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2002. "Stability of the Cournot process - experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 31(1), pages 123-136.
    • Handle: RePEc:spr:jogath:v:31:y:2002:i:1:p:123-136
    Note: Received May 1997/Revised June 2002
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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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