Price Competition Between Teams

Gary Bornstein and Uri Gneezy

Experimental Economics, 2002, vol. 5, issue 1, pages 29-38

Abstract: This study uses an experimental approach to examine whether markets are sensitive to the internal incentive structure of the competitors. Toward this goal, we modeled the competitors in a price competition duopoly game as three-player teams. Each player simultaneously declares a bid (price) and the team whose total bid was lower won the competition and was paid accordingly. The losing team was paid nothing, and in case of a tie, each team was paid half its price. This duopoly game was studied under two conditions; a cooperative treatment in which the team's profit was divided equally amongst its members and a non-cooperative one in which each individual member was paid her own bid. Whereas the Nash equilibrium is for each player in either treatment to demand the minimal price possible, we predicted that convergence to the competitive price would be much faster in the cooperative treatment than in the non-cooperative one. The experimental results firmly confirmed this prediction. Copyright Kluwer Academic Publishers 2002

Keywords: price competition; team games (search for similar items in EconPapers)
Date: 2002
View list of references View citations in EconPapers

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1016312624038 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:kap:expeco:v:5:y:2002:i:1:p:29-38

Access Statistics for this article

Experimental Economics is edited by Jordi Brandts and Timothy Cason

More articles in Experimental Economics from Springer
Series data maintained by Christopher F. Baum ().