Market volatility and inequality in earnings: experimental evidence |
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Authors: | Steffen Huck, Hans-Theo Normann,J rg Oechssler |
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Affiliation: | a Department of Economics, Royal Holloway College, London, UK;b Department of Economics, Humboldt University, Berlin, Germany;c Department of Economics, University of Bonn, Bonn, Germany |
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Abstract: | We analyze the volatility of actions in experimental oligopoly markets. Can the volatility, measured as the total variation in actions, be predicted by inequality in earnings of the previous period? We examine two types of differentiated markets, Cournot and Bertrand, and two informational conditions. We find for both types of markets and regardless of the information available to firms that inequality in earnings is a major factor for explaining volatility. The more equal profits are distributed, the less volatility is observed. |
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Keywords: | Oligopoly Experiments Inequality |
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