IDEAS home Printed from https://ideas.repec.org/p/cte/werepe/we1024.html
   My bibliography  Save this paper

The effect of experience in Cournot play

Author

Listed:
  • Ferreira, José Luis
  • Kujal, Praveen
  • Rassenti, Stephen

Abstract

Strategic play requires that players in oligopolies be more sophisticated than in perfectly competitive markets. It thus seems reasonable to assume that player experience becomes important as the environment gets more complicated. We find that subject experience indeed plays an important role. While inexperienced symmetric duopolies play around the Nash-Cournot quantity, experienced duopolies reduce output and get closer to the monopolistic outcome. Both inexperienced and experienced symmetric quadropolies,however, produce output above the Nash-Coumot equilibrium but, even in this case, output is lower for experienced quadropolies. Experience, however, does not make markets less competitive with the introduction of cost asymmetry. Under cost asymmetry, and relative to the equilibrium prediction, high cost firms produce more output than low cost firms. Analysis of individual data tells us that experienced duopolies and quadropolies adjust output in the same direction as their rivals. Due to the strategic substitutability of quantity choice, we interpret this as an attempt at tacitly colluding. This is true for both duopolies and quadropolies.

Suggested Citation

  • Ferreira, José Luis & Kujal, Praveen & Rassenti, Stephen, 2010. "The effect of experience in Cournot play," UC3M Working papers. Economics we1024, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we1024
    as

    Download full text from publisher

    File URL: https://e-archivo.uc3m.es/bitstream/handle/10016/9403/we1024.pdf?sequence=1
    Download Restriction: no

    References listed on IDEAS

    as
    1. Le Coq, Chloe & Orzen, Henrik, 2006. "Do forward markets enhance competition?: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 415-431, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cte:werepe:we1024. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Poveda). General contact details of provider: http://www.eco.uc3m.es/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.