Behavioral Convergence Properties of Cournot and Bertrand Markets: An Experimental Analysis

Douglas Davis

No 808, Working Papers from VCU School of Business, Department of Economics

Abstract: This paper reports an experiment that examines the relative convergence properties of differentiated-product Cournot and Bertrand oligopolies. Overall, Bertrand markets tend to converge to Nash equilibrium predictions more quickly and more completely than Cournot markets. Further, when products are close substitutes Bertrand markets respond more quickly to an announced nominal shock. As products become weaker substitutes, however, an increased tendency for tacit collusion degrades convergence in Bertrand markets. This effect is particularly pronounced following a nominal shock. Our results suggest that in an oligopoly context variations in decision error costs dominate a 'Strategic Substitutes Effect' isolated in previous experimental research.

Keywords: Experiments; Strategic Substitutes and Strategic Complements; Bertrand and Cournot Markets (search for similar items in EconPapers)
JEL-codes: C9 D4 L4 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-10, Revised 2011-01
New Economics Papers: this item is included in nep-com, nep-cse, nep-exp, nep-ind and nep-mic
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Behavioral convergence properties of Cournot and Bertrand markets: An experimental analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:vcu:wpaper:0808

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