Information and Learning in Oligopoly: an Experiment

Maria Bigoni

No 72, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: I report results of an experiment designed to study the relation between the process of information search and learning in a Cournot oligopoly, with limited a priori information. Different theories of learning have been applied to this setting, each yielding a specific market outcome in the long run, and postulating specific informational requirements. By allowing players to choose the information they wish to acquire, and controlling for these choices, I study the features of the learning model actually followed by the subjects, and the relation between the information they gather and the market behavior they adopt. According to my results, learning appears to be a composite process, in which different components coexist. Belief learning seems to be the leading element, as subjects try to form expectations about their opponents' future actions and to best reply to them. When subjects also look at the strategies individually adopted by their competitors, though, they tend to imitate the most successful behavior, which makes markets more competitive. Finally, reinforcement learning also plays a nonnegligible role, as subjects tend to favor strategies that have yielded higher profits in the past. I show that these different elements may be usefully incorporated into a more sophisticated learning model, shaped after self tuning EWA learning model.

Keywords: Information; Learning; Imitation; Collusion (search for similar items in EconPapers)
JEL-codes: L13 C92 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-exp
Date: 2008-03
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