Second Mover Advantage and Bertrand Dynamic Competition: An Experiment
In this paper we provide an experimental test of a dynamic Bertrand duopolistic model, where firms move sequentially and their informational setting varies across different designs. Our experiment is composed of three treatments. In the first treatment, subjects receive information only on the costs and demand parameters and on the price’ choices of their opponent in the market in which they are positioned (matching is fixed); in the second and third treatments, subjects are also informed on the behaviour of players who are not directly operating in their market. Our aim is to study whether the individual behaviour and the process of equilibrium convergence are affected by the specific informational setting adopted. In all treatments we selected students who had previously studied market games and industrial organization, conjecturing that the specific participants’ expertise decreased the chances of imitation in treatment II and III. However, our results prove the opposite: the extra information provided in treatment II and III strongly affects the long run convergence to the market equilibrium. In fact, whilst in the first session, a high proportion of markets converge to the Nash-Bertrand symmetric solution, we observe that a high proportion of markets converge to more collusive outcomes in treatment II and more competitive outcomes in treatment III. By the same token, players’ profits significantly differ in three settings. An interesting point of our analysis relates to the assessment of the individual behavioural rules in the second and third treatments. When information on the behaviour of participants on uncorrelated markets is provided, players begin to adopt mixed behavioural rules, in the sense that they follow myopic best reply rules as long as their profits are in line with the average profits on all markets, and , when their gains fall below that threshold, they start imitating successful strategies adopted on other markets.
|Date of creation:||May 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.depfid.unisi.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Huck, Steffen & Müller, Wieland & Normann, Hans-Theo, 1999.
"Stackelberg beats Cournot: On collusion and efficiency in experimental markets,"
SFB 373 Discussion Papers
1999,32, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2001. "Stackelberg Beats Cournot: On Collusion and Efficiency in Experimental Markets," Economic Journal, Royal Economic Society, vol. 111(474), pages 749-65, October.
- Eric van Damme & Sjaak Hurkens, 1998.
"Endogenous price leadership,"
Economics Working Papers
289, Department of Economics and Business, Universitat Pompeu Fabra.
- Eric van Damme & Sjaak Hurkens, 2001. "Endogenous price leadership," Economics Working Papers 581, Department of Economics and Business, Universitat Pompeu Fabra.
- van Damme, E.E.C. & Hurkens, J.P.M., 1998. "Endogenous price leadership," Discussion Paper 98.68, Tilburg University, Center for Economic Research.
- van Damme, E.E.C. & Hurkens, S., 2004. "Endogenous price leadership," Other publications TiSEM 0bc41e9f-cede-46e7-bab6-b, Tilburg University, School of Economics and Management.
- Amir, Rabah & Stepanova, Anna, 2006.
"Second-mover advantage and price leadership in Bertrand duopoly,"
Games and Economic Behavior,
Elsevier, vol. 55(1), pages 1-20, April.
- Rabah Amir & Anna Stepanova, 2000. "Second-Mover Advantage and Price Leadership in Bertrand Duopoly," CIE Discussion Papers 2000-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- AMIR, Rabah & STEPANOVA, Anna, 2004. "Second-mover advantage and price leadership in Bertrand duopoly," CORE Discussion Papers 2004037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Güth, W. & Müller, W. & Spiegel, Y., 2006.
"Noisy leadership : An experimental approach,"
Other publications TiSEM
e4796461-8862-4085-a867-8, Tilburg University, School of Economics and Management.
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000.
"Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?,"
International Journal of Industrial Organization,
Elsevier, vol. 18(1), pages 39-57, January.
- Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," Industrial Organization 9803004, EconWPA.
- Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October.
- Armstrong, Mark & Huck, Steffen, 2010.
"Behavioral economics as applied to firms: a primer,"
20356, University Library of Munich, Germany.
- Mark Armstrong & Steffen Huck, 2010. "Behavioral Economics as Applied to Firms: A Primer," CPI Journal, Competition Policy International, vol. 6.
- Mark Armstrong & Steffen Huck, 2011. "Behavioral Economics as Applied to Firms: A Primer," Antitrust Chronicle, Competition Policy International, vol. 1.
- Mark Armstrong & Steffen Huck, 2010. "Behavioral Economics as Applied to Firms: A Primer," CESifo Working Paper Series 2937, CESifo Group Munich.
- Gal-Or, Esther, 1987. "First Mover Disadvantages with Private Information," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 279-92, April.
- Hamilton, Jonathan H. & Slutsky, Steven M., 1990.
"Endogenous timing in duopoly games: Stackelberg or cournot equilibria,"
Games and Economic Behavior,
Elsevier, vol. 2(1), pages 29-46, March.
- Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999.
"Learning in Cournot Oligopoly--An Experiment,"
Royal Economic Society, vol. 109(454), pages C80-95, March.
When requesting a correction, please mention this item's handle: RePEc:usi:labsit:028. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alessandro Innocenti)
If references are entirely missing, you can add them using this form.