Playing Cournot although they shouldn’t |
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Authors: | Miguel A. Fonseca Steffen Huck Hans-Theo Normann |
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Affiliation: | (1) Economics Department, Royal Holloway University of London, TW20 0EX Egham, Surrey, UK;(2) Department of Economics & ELSE, University College London, Gower Street, WC1E 6BT London, UK |
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Abstract: | Summary. In this note, we experimentally investigate the extended game with action commitment in a Cournot duopoly with asymmetric cost. Risk dominance considerations allow to select a unique equilibrium in which the low-cost firm is the Stackelberg leader. The data, however, do not support the theory as simultaneous-move play is modal. Average output choices are in line with the Cournot equilibrium. This suggests that Cournot is a much more robust predictor for competition in markets than theory suggests.Received: 14 October 2002, Revised: 1 December 2003, JEL Classification Numbers: C72, C92, D43. Correspondence to: Hans-Theo Normann |
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Keywords: | Commitment Endogenous timing Experimental economics Risk dominance Stackelberg. |
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