Economics at your fingertips  

An experiment on spatial competition with endogenous pricing

Iván Barreda-Tarrazona (), Aurora García-Gallego (), Nikolaos Georgantzís (), Joaquín Andaluz-Funcia and Agustín Gil-Sanz

International Journal of Industrial Organization, 2011, vol. 29, issue 1, 74-83

Abstract: Hotelling's (1929) principle of minimum differentiation and the alternative prediction that firms will maximally differentiate from their rivals in order to relax price competition have not been explicitly tested so far. We report results from experimental spatial duopolies designed to address this issue. The levels of product differentiation observed are systematically lower than predicted in equilibrium under risk neutrality and compatible with risk aversion. The observed prices are consistent with collusion attempts. Our main findings are robust to variations in three experimental conditions: automated vs. human market sharing rule for ties, individual vs. collective decision making, and even vs. odd number of locations.

Keywords: Product; differentiation; Price; competition; Sharing; rules (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-10-14
Handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:74-83