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Quantity Precommitment with Price Competition versus Quantity Precommitment with Market Clearing Prices in the Laboratory

Author

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  • David Goodwin
  • Stuart Mestelman

Abstract

The paper reports the results of 39 laboratory duopoly markets for which pricing institution and participant experience are treatments. Cournot (C) duopolies (quantity precommitment and a price determined to clear the market) are contrasted with Kreps-Scheinkman (KS) duopolies (quantity precommitment and posted prices). Inexperienced participants in KS markets have much more difficulty selecting capacities consistent with the theoretical predictions than do those in C markets. With experience, the differences disappear.

Suggested Citation

  • David Goodwin & Stuart Mestelman, 2009. "Quantity Precommitment with Price Competition versus Quantity Precommitment with Market Clearing Prices in the Laboratory," Department of Economics Working Papers 2009-04, McMaster University.
  • Handle: RePEc:mcm:deptwp:2009-04
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2009-04.pdf
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    Keywords

    Duopoly; Laboratory experiment; Quantity precommitment; Posted prices; Price competition; Market-clearing prices; Experience;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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