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Group dynamics in experimental studies - the Bertrand Paradox revisited
[journal article]
Abstract "Different information provision in experimental markets can drastically change subjects' behavior. Considering the repeated Bertrand duopoly game of Dufwenberg and Gneezy (Dufwenberg, M., Gneezy's, U., 2000. Price competition and market concentration: an experimental study. International Journal of... view more
"Different information provision in experimental markets can drastically change subjects' behavior. Considering the repeated Bertrand duopoly game of Dufwenberg and Gneezy (Dufwenberg, M., Gneezy's, U., 2000. Price competition and market concentration: an experimental study. International Journal of Industrial Organization 18, 7–22.), we find that population feedback about the prices in other markets outside a subjects' own current market causes group dynamics that prevent prices from convergence to Nash equilibrium. Limited information comprising only the decisions of a subject's own opponent, in contrast, leads to competitive behavior. When we extend the number of periods from 10 to 25 in the full information treatment (FULL) we observe a very robust cyclical up and down movement of prices. We can explain tacit coordination in our experiment with an extended learning direction model and leadership by example." [author's abstract]... view less
Keywords
experiment
Classification
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Free Keywords
Bertrand duopoly; Tacit collusion; Learning; Leadership by example
Document language
English
Publication Year
2008
Page/Pages
p. 51-63
Journal
Journal of Economic Behavior & Organization, 69 (2008) 1
DOI
https://doi.org/10.1016/j.jebo.2008.10.002
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)