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

  • 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)

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.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-067.

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Date of creation: 09 Sep 2008
Date of revision:
Handle: RePEc:jrp:jrpwrp:2008-067
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