Group dynamics in experimental studies - the Bertrand Paradox revisited

"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

Strategic Buyers and Market Entry

This paper tests two basic assumptions underlying court made or statutory provisions prohibiting predatory pricing. Such prohibitions are usually based on the economic grounds that monopolistic pricing is likely to occur in the long run, causing harm to competition and consumers. The first assumption under scrutiny is that customers will accept monopolistic prices during the subsequent phase of recoupment, even though they have become accustomed to low prices during the price war. The second assumption is that no competitor will (re-)enter the market in this subsequent phase. Our two experiments indicate that both assumptions are not backed up by actual decision making both of consumers and of competitors. Moreover, we find that consumers use their market power in order to maintain long-run competition

Time to defect: repeated prisoners' dilemma experiments with uncertain horizon

Using a symmetric 2-person prisoners dilemma as the base game, each player receives a signal for the number of rounds to be played with the same partner. The actual number of rounds (the length of the supergame) is determined by the maximal signal where each player expects the others signal to be smaller, respectively larger, by a fixed number of rounds with 50% probability. In the tradition of Folk Theorems we show that both, mutual defection and mutual cooperation until the individually perceived last round, are subgame perfect equilibrium outcomes. We find experimental evidence that many players do in fact cooperate beyond their individual signal period

Nudging als politisches Instrument - gute Absicht oder staatlicher Übergriff?

Die Verhaltensökonomie und ihre praktischen Implikationen geraten immer stärker in den Fokus auch der deutschen Politik. Individuelle Entscheidungen sollen im Sinne eines „libertären Paternalismus“ „sanft“ beeinflusst werden. Die „Nudges“ bestehen in Standardvorgaben, Selbstbindungen und der Informationsbereitstellung. Deren Anwendung setzt allerdings die Klärung einiger Fragen voraus: Wer darf sich anmaßen, für die Wirtschaftssubjekte „kluge“ Entscheidungen zu treffen? Bei welchen Entscheidungen sind Eingriffe einer anderen Instanz begründbar? Mit welchem Zeithorizont und aufgrund welcher Wohlfahrtsüberlegungen wird eine Entscheidung als „richtig“ definiert? Welcher Rationalitätsbegriff steht hinter dem Konzept

Group dynamics in experimental studies--The Bertrand Paradox revisited

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.Bertrand duopoly Tacit collusion Learning Leadership by example Experiment

A Service of zbw Strategic Buyers and Market Entry *

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper tests two basic assumptions underlying court made or statutory provisions prohibiting predatory pricing. Such prohibitions are usually based on the economic grounds that monopolistic pricing is likely to occur in the long run, causing harm to competition and consumers. The first assumption under scrutiny is that customers will accept monopolistic prices during the subsequent phase of recoupment, even though they have become accustomed to low prices during the price war. The second assumption is that no competitor will (re-)enter the market in this subsequent phase. Our two experiments indicate that both assumptions are not backed up by actual decision making both of consumers and of competitors. Moreover, we find that consumers use their market power in order to maintain long-run competition. Terms of use: Documents in EconStor may JEL classification: C91, D21, L11. Keywords: Buyer Power, Predatory Pricing, Recoupment, Experiment. * We thank seminar participants in Konstanz and Tilburg for very helpful suggestions. We are particularly grateful to Wieland Müller for his comments on an earlier version of this paper. Philipp Wahlen and Ruben Lingenfelser provided excellent research support

Richard H. Thaler — the Winner of the Nobel Prize in Economics 2017

Der diesjährige Nobelpreisträger Richard H. Thaler ist einer breiteren Öffentlichkeit vor allem durch sein mit Cass R. Sunstein gemeinsam verfasstes Buch zum Nudging bekannt geworden. Tatsächlich hat er in den vergangenen 40 Jahren die Entwicklung der Verhaltensökonomie entscheidend mitgeprägt und vorangebracht. Thaler hat die Annahmen hinter dem Modell des Homo oeconomicus untersucht und die Abweichungen menschlichen Verhaltens von den Rationalitätsannahmen auf zwei wesentliche Ursachen zurückgeführt: kognitive Einschränkungen und Mängel bei der Selbstkontrolle. Neben den Rationalitätsannahmen beziehen sich seine Forschungen aber auch auf Überlegungen zur Grundhaltung von Wirtschaftssubjekten gegenüber anderen und deren Auswirkungen auf ihr wirtschaftliches Handeln.Richard H. Thaler was awarded this year's Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 'for his contributions to behavioural economics'. He studied systematic departures of human behaviour from the standard 'homo oeconomicus' assumption. His famous work on boundedly rational behaviour considers both cognitive limitations and limited self-control. The cognitive limitations he studied are in particular the endowment effect, i.e. the observation that individuals assign a higher value to an object if they possess it, and mental accounting, a collection of theories regarding how individuals think about money. Furthermore, he provided path-breaking evidence on the nature of social preferences, which laid the groundwork for the development of several widely used economic theories incorporating altruism, fairness and reciprocity

Voluntary Cooperation Based on Equilibrium Retribution : An Experiment Testing Finite-Horizon Folk Theorems

Unlike previous attempts to implement cooperation in a prisoners' dilemma game with an infinite horizon in the laboratory, we focus on extended prisoners' dilemma games in which a second (pure strategy) equilibrium allows for voluntary cooperation in all but the last round. Our four main experimental treatments distinguish long versus short horizon and strict versus non-strict additional equilibrium compared to the control treatment, a standard prisoners' dilemma. Quite surprisingly, according to our results, only a strict additional equilibrium increases cooperation rate for a given time horizon. As expected a longer time horizon promotes cooperation

Voluntary Cooperation Based on Equilibrium Retribution - An Experiment Testing Finite-Horizon Folk Theorems

Unlike previous attempts to implement cooperation in a prisoners' dilemma game with an infinite horizon in the laboratory, we focus on extended prisoners' dilemma games in which a second (pure strategy) equilibrium allows for voluntary cooperation in all but the last round. Our four main experimental treatments distinguish long versus short horizon and strict versus non-strict additional equilibrium compared to the control treatment, a standard prisoners' dilemma. Quite surprisingly, according to our results, only a strict additional equilibrium increases cooperation rate for a given time horizon. As expected a longer time horizon promotes cooperation.Folk theorem, Finite horizon, Prisoners' dilemma, Experiment