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Adaptive Behavior By Single-Product And Multiproduct Price Setting Firms In Experimental Markets

Author

Listed:
  • Nikolaos Georgantzis

    (Universitat Jaume I)

  • Aurora García Gallego

    (Universitat Jaume I)

Abstract

Using data obtained from experiments reported in García-Gallego (1998) and García- Gallego and Georgantzís (2001), we estimate a simple model of adaptive behavior which could describe pricing in a market whose demand conditions are unknown to the firms. Divergence between the limit of observed prices over time and theoretical predictions concerning multiproduct firms could be partially explained as a result of learning limitations associated with multiple task-oriented problem solving. However, optimal multiproduct pricing requires that subjects use two different kinds of rules: one concerning responses to prices charged by other players and another concerning pricing of own products. Even in a simple environment like the one studied here, subjects seem to be far more successful in learning a number than learning a rule.

Suggested Citation

  • Nikolaos Georgantzis & Aurora García Gallego, 2001. "Adaptive Behavior By Single-Product And Multiproduct Price Setting Firms In Experimental Markets," Working Papers. Serie AD 2001-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2001-13
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    References listed on IDEAS

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    More about this item

    Keywords

    Adaptive Learning; Experimental Oligopoly; Multiproduct Firms.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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