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From imitation to collusion: Long-run learning in a low-information environment

  • Friedman, Daniel
  • Huck, Steffen
  • Oprea, Ryan
  • Weidenholzer, Simon

We explore the stability of imitation in a 1,200-period experimental Cournot game where subjects do not know the payoff function but see the output quantities and payoffs of each oligopolist after every period. In line with theoretical predictions and previous experimental findings, our oligopolies reach highly competitive levels within 50 periods. However, already after 100 periods quantities start to drop and, eventually fall deep into collusive territory without pausing at the Nash equilibrium. Our results demonstrate how groups of subjects can learn their way out of dysfunctional heuristics, and thus suggest the need for a new theory of how cooperation emerges.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economics of Change with number SP II 2012-301.

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Date of creation: 2012
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Handle: RePEc:zbw:wzbeoc:spii2012301
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  1. Eshel, Ilan & Samuelson, Larry & Shaked, Avner, 1998. "Altruists, Egoists, and Hooligans in a Local Interaction Model," American Economic Review, American Economic Association, vol. 88(1), pages 157-79, March.
  2. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
  3. Ben Greiner, 2004. "The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics," Working Paper Series in Economics 10, University of Cologne, Department of Economics.
  4. Jose Apesteguia & Steffen Huck & Jörg Oechssler, 2005. "Imitation - Theory and Experimental Evidence -," Working Papers 0419, University of Heidelberg, Department of Economics, revised Apr 2005.
  5. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  7. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  8. Beggs, A.W., 2005. "On the convergence of reinforcement learning," Journal of Economic Theory, Elsevier, vol. 122(1), pages 1-36, May.
  9. repec:ner:tilbur:urn:nbn:nl:ui:12-91663 is not listed on IDEAS
  10. Paul Milgrom & John Roberts, 2010. "Adaptive and Sophisticated Learning in Repeated Normal-Form Games," Levine's Working Paper Archive 418, David K. Levine.
  11. Apesteguia, Jose & Huck, Steffen & Oechssler, Jörg & Weidenholzer, Simon, 2007. "Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust," Sonderforschungsbereich 504 Publications 07-69, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  12. Karl H. Schlag, 1995. "Why Imitate, and if so, How? A Bounded Rational Approach to Multi-Armed Bandits," Discussion Paper Serie B 361, University of Bonn, Germany, revised Mar 1996.
  13. Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
  14. Offerman, T.J.S. & Potters, J.J.M. & Sonnemans, J., 2002. "Imitation and belief learning in an oligopoly experiment," Other publications TiSEM a6a771c5-31ba-4193-8f76-a, School of Economics and Management.
  15. J. Robinson, 1969. "An Iterative Method of Solving a Game," Levine's Working Paper Archive 422, David K. Levine.
  16. Alger, Dan, 1987. "Laboratory Tests of Equilibrium Predictions with Disequilibrium Data," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 105-45, January.
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