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Number of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets

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  • Jacobs, Martin

Abstract

This study provides a comprehensive picture of experimental Kreps-Scheinkman markets with capacity choice in the first stage and subsequent price competition at the second. We conduct seven different treatments of such markets, varying the number of firms, the demand rationing scheme, the subject matching, and subjects' knowledge about the market mechanism. We find that only the number of firms entails a persistent effect on capacity choices. Price choices are affected by both the number of firms and the rationing scheme. Subjects in the high-knowledge condition behave in the same manner from the first periods as subjects with low knowledge do in later periods after having gained experience. In all treatments conduct is generally more competitive than the Cournot outcome, irrespective of whether the Cournot outcome is the Nash equilibrium or not. Nevertheless, the Cournot model entails some predictive power. Exact Cournot choices are more likely to occur for both capacities and prices under efficient demand rationing, where the Cournot outcome is the equilibrium, than under proportional rationing.

Suggested Citation

  • Jacobs, Martin, 2016. "Number of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets," Economics Working Papers 2016-02, Christian-Albrechts-University of Kiel, Department of Economics.
  • Handle: RePEc:zbw:cauewp:201602
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    15. Jacobs, Martin & Requate, Till, 2016. "Demand rationing in Bertrand-Edgeworth markets with fixed capacities: An experiment," Economics Working Papers 2016-03, Christian-Albrechts-University of Kiel, Department of Economics.
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    Cited by:

    1. Jacobs, Martin & Requate, Till, 2016. "Demand rationing in Bertrand-Edgeworth markets with fixed capacities: An experiment," Economics Working Papers 2016-03, Christian-Albrechts-University of Kiel, Department of Economics.
    2. Jacobs, Martin & Requate, Till, 2016. "Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence," Economics Working Papers 2016-01, Christian-Albrechts-University of Kiel, Department of Economics.

    More about this item

    Keywords

    Kreps-Scheinkman; Cournot; price competition; capacity choice; demand rationing; oligopoly; laboratory experiment;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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