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Quantity Precommitment with Price Competition versus Quantity Precommitment with Market Clearing Prices in the Laboratory
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Abstract
The paper reports the results of 39 laboratory duopoly markets for which pricing institution and participant experience are treatments. Cournot (C) duopolies (quantity precommitment and a price determined to clear the market) are contrasted with Kreps-Scheinkman (KS) duopolies (quantity precommitment and posted prices). Inexperienced participants in KS markets have much more difficulty selecting capacities consistent with the theoretical predictions than do those in C markets. With experience, the differences disappear.Duopoly; Laboratory experiment; Quantity precommitment; Posted prices; Price competition; Market-clearing prices; Experience