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

  • Nikolaos Georgantzis

    ()

    (Universitat Jaume I)

  • Aurora García Gallego

    ()

    (Universitat Jaume I)

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.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2001-13.

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Length: 41 pages
Date of creation: May 2001
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2001-13
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