Experimentally Observed Imitation and Cooperation in Price Competition on the Circle

Reinhard Selten and Jose Apesteguia ()

Bonn Econ Discussion Papers from University of Bonn, Germany

Abstract: This paper reports an experiment on a location game, the so-called "Price-Competition on the Circle." There are n symmetric firms equidistantly located on a circle. Consumers are uniformly distributed. Each consumer buys one and only one unit from that firm whose price, including the cost of transportation, is the lowest, provided such a price is below a maximum willingness to pay. Experiments, extended over 200 periods, were run with 3, 4, and 5 participants. Subjects did not receive any information about the relationship between prices and profits, but they received feedback on prices and profits of two neighbors after each period. The evaluation compares predictions derived from imitation equilibrium (Selten and Ostmann 2001) and Cournot equilibrium, as well as symmetric joint-profit maximization. The results qualitatively favor imitation equilibrium, as long as no cooperation is observed.

Keywords: Imitation; Cooperation; Location; Experiments (search for similar items in EconPapers)
JEL-codes: C72 C92 L13 R32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo and nep-exp
Date: 2002-08
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Related works:
Journal Article: Experimentally observed imitation and cooperation in price competition on the circle (2005)
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