From Imitation to Collusion: Long-run Learning in a Low-Information Environment

Daniel Friedman, Steffen Huck, Ryan Oprea and Simon Weidenholzer

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: We study long-run learning in an experimental Cournot game with no explicit information about the payoff function. Subjects see only the quantities and payoffs of each oligopolist after every period. In line with theoretical predictions and previous experimental findings, duopolies and triopolies both reach highly competitive levels, with price approaching marginal cost within 50 periods. Using the new ConG software, we extend the horizon to 1,200 periods, far beyond that previously investigated. Already after 100 periods we observe a qualitative change in behavior, and quantity choices start to drop. Without pausing at the Cournot-Nash level quantities continue to drop, eventually reaching almost fully collusive levels in duopolies and often reaching deep into collusive territory for triopolies. Fitted models of individual adjustment suggest that subjects switch from imitation of the most profitable rival to other behavior that, intentionally or otherwise, facilitates collusion via effective punishment and forgiveness. Remarkably, subjects never learn the best-reply correspondence of the one-shot game. Our results suggest a new explanation for the emergence of cooperation.

Keywords: Cournot oligopoly; imitation; learning dynamics; cooperation. (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://repository.essex.ac.uk/8954/ original version (application/pdf)

Related works:
Journal Article: From imitation to collusion: Long-run learning in a low-information environment (2015)
Working Paper: From Imitation to Collusion: Long-run Learning in a Low-Information Environment (2012)
Working Paper: From imitation to collusion: Long-run learning in a low-information environment (2012)
Working Paper: From imitation to collusion: Long-run learning in a low-information environment (2012)
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: https://EconPapers.repec.org/RePEc:esx:essedp:8954

Ordering information: This working paper can be ordered from
Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.

Access Statistics for this paper

More papers in Economics Discussion Papers from University of Essex, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Essex Economics Web Manager ().