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From Imitation to Collusion: Long-run Learning in a Low-Information Environment

  • Daniel Friedman
  • Steffen Huck
  • Ryan Oprea
  • Simon Weidenholzer

We explore the stability of imitation in a 1200-period experimental Cournot game where subjects do not know the payoff function but see the output quantities and payoffs of each oligopolist after every period. In line with theoretical predictions and previous experimental findings, our oligopolies reach highly competitive levels within 50 periods. However, already after 100 periods, quantities start to drop and eventually fall deep into collusive territory without pausing at the Nash equilibrium. Our results demonstrate how groups of subjects can learn their way out of dysfunctional heuristics, and suggest elements for a new theory of how cooperation emerges.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000457.

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Date of creation: 22 Jul 2012
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Handle: RePEc:cla:levarc:786969000000000457
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  1. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April.
  2. Apestgeguia, Jose & Huck, Steffen & Oechssler, Jörg, 2005. "Imitation - Theory and Experimental Evidence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 54, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
  4. Jose Apesteguia & Steffen Huck & Jörg Oechssler & Simon Weidenholzer, 2008. "Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust," CESifo Working Paper Series 2224, CESifo Group Munich.
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  8. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  9. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1997. "Learning in Cournot Oligopoly - An Experiment," Game Theory and Information 9707009, EconWPA, revised 22 Jul 1997.
  10. Siegfried Berninghaus & Karl-Martin Ehrhart & Claudia Keser, 1999. "Continuous-Time Strategy Selection in Linear Population Games," Experimental Economics, Springer, vol. 2(1), pages 41-57, August.
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  16. Offerman, Theo & Potters, Jan & Sonnemans, Joep, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 973-97, October.
  17. Karl H. Schlag, 1995. "Why Imitate, and if so, How? A Bounded Rational Approach to Multi-Armed Bandits," Discussion Paper Serie B 361, University of Bonn, Germany, revised Mar 1996.
  18. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  19. Beggs, A.W., 2005. "On the convergence of reinforcement learning," Journal of Economic Theory, Elsevier, vol. 122(1), pages 1-36, May.
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  21. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  22. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 2004. "Through Trial and Error to Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 205-224, 02.
  23. Daniel Friedman & Ryan Oprea, 2012. "A Continuous Dilemma," American Economic Review, American Economic Association, vol. 102(1), pages 337-63, February.
  24. Selten, Reinhard & Stoecker, Rolf, 1986. "End behavior in sequences of finite Prisoner's Dilemma supergames A learning theory approach," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 47-70, March.
  25. Eshel, Ilan & Samuelson, Larry & Shaked, Avner, 1998. "Altruists, Egoists, and Hooligans in a Local Interaction Model," American Economic Review, American Economic Association, vol. 88(1), pages 157-79, March.
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