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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 2012-301r.

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Date of creation: 2012
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Handle: RePEc:zbw:wzbeoc:spii2012301r
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  1. G. Ellison & D. Fudenberg, 2010. "Rules of Thumb for Social Learning," Levine's Working Paper Archive 435, David K. Levine.
  2. 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.
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  7. Paul Milgrom & John Roberts, 2010. "Adaptive and Sophisticated Learning in Repeated Normal-Form Games," Levine's Working Paper Archive 418, David K. Levine.
  8. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
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  10. 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.
  11. J. Robinson, 1969. "An Iterative Method of Solving a Game," Levine's Working Paper Archive 422, David K. Levine.
  12. 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, Tilburg University, School of Economics and Management.
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  15. repec:ner:tilbur:urn:nbn:nl:ui:12-91663 is not listed on IDEAS
  16. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
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