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Information and Learning in Oligopoly: An Experiment

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Listed author(s):
  • Bigoni, Maria

    ()

    (University of Bologna)

  • Fort, Margherita

    ()

    (University of Bologna)

Abstract

This paper presents an experiment on learning in repeated games, which complements the analysis of players' actual choices with data on the information acquisition process they follow. Subjects play a repeated Cournot oligopoly, with limited a priori information. The econometrics hinges on a model built upon Experience Weighted Attraction learning, and the simultaneous analysis of data on the information gathered and on actions taken by the subjects. Results suggest that learning is a composite process, in which different components coexist. Adaptive learning emerges as the leading element, but when subjects look at the strategies individually adopted by their competitors they tend to imitate the most successful behavior, which makes markets more competitive. Reinforcement learning also plays a role, as subjects favor strategies that have yielded higher profits in the past.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7125.

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Length: 68 pages
Date of creation: Jan 2013
Handle: RePEc:iza:izadps:dp7125
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Keywords: Cournot oligopoly; EWA learning; imitation; information;

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Find related papers by JEL classification:
  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
  • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
  • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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Cited by:

  1. Buckert, Magdalena & Oechssler, Jörg & Schwieren, Christiane, 2014. "Imitation under stress," Working Papers 0556, University of Heidelberg, Department of Economics.
  2. Jörg Oechssler & Alex Roomets & Stefan Roth, 2016. "From imitation to collusion: a replication," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(1), pages 13-21, May.
  3. Nikolas Tsakas, 2013. "Diffusion by Imitation: The Importance of Targeting Agents," 2013 Papers pts99, Job Market Papers.
  4. Mark Armstrong & Steffen Huck, 2011. "Behavioral Economics as Applied to Firms: A Primer," Antitrust Chronicle, Competition Policy International, vol. 1.
  5. Bigoni, Maria & Fort, Margherita, 2013. "Information and learning in oligopoly: An experiment," Games and Economic Behavior, Elsevier, vol. 81(C), pages 192-214.
  6. Oechssler, Jörg & Roomets, Alex & Roth, Stefan, 2015. "From Imitation to Collusion - A Comment," Working Papers 0588, University of Heidelberg, Department of Economics.

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