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An experiment on supply function competition

Friedel Bolle, Veronika Grimm, Axel Ockenfels and Xavier Del Pozo ()

European Economic Review, 2013, vol. 63, issue C, 170-185

Abstract: We experimentally investigate key predictions of supply function equilibrium. While, overall, equilibrium organizes bidding behavior well, we observe three important deviations. First, bidding is sensitive to theoretically irrelevant changes of the demand distribution. Second, in a market with symmetric firms we observe tacit collusion in that firms provide less than the predicted quantities. Third, in a market with asymmetric capacities, the larger firm bids more competitively than predicted, while the smaller firms still provide less than equilibrium quantities.

Keywords: Supply function competition; Experiment; Demand uncertainty; Asymmetric firms (search for similar items in EconPapers)
JEL-codes: C92 D43 L11 D44 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:63:y:2013:i:c:p:170-185

DOI: 10.1016/j.euroecorev.2013.06.006

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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