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Satisficing and prior-free optimality in price competition: a theoretical and experimental analysis

Author

Listed:
  • Werner Güth

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

  • M. Vittoria Levatia

    () (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

  • Matteo Ploner

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany; University of Trento, Italy)

Abstract

On a heterogeneous experimental oligopoly market, sellers choose a price, specify a set-valued prior-free conjecture about the others' behavior, and form their own profit-aspiration for each element of their conjecture. We formally define the concepts of satisficing and prior-free optimality and check if seller participants behave in accordance with them. We find that seller participants are satisficers, but fail to be "prior-free" optimal.

Suggested Citation

  • Werner Güth & M. Vittoria Levatia & Matteo Ploner, 2008. "Satisficing and prior-free optimality in price competition: a theoretical and experimental analysis," Jena Economic Research Papers 2008-067, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2008-067
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    File URL: http://zs.thulb.uni-jena.de/receive/jportal_jparticle_00107331
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    Citations

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    Cited by:

    1. Siegfried Berninghaus & Werner Güth & M. Levati & Jianying Qiu, 2011. "Satisficing search versus aspiration adaptation in sales competition: experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 40(1), pages 179-198, February.
    2. Güth, Werner & Vittoria Levati, M. & Ploner, Matteo, 2010. "Satisficing in strategic environments: A theoretical approach and experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(5), pages 554-561, October.

    More about this item

    Keywords

    Satisficing behavior; Bounded rationality; Triopoly;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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