Behavioral convergence properties of Cournot and Bertrand markets: An experimental analysis

Douglas Davis

Journal of Economic Behavior & Organization, 2011, vol. 80, issue 3, 443-458

Abstract: This paper reports an experiment that examines the relative convergence properties of differentiated-product Cournot and Bertrand oligopolies. Overall, Bertrand markets tend to converge to Nash equilibrium predictions more quickly and more completely than Cournot markets. Further, when products are close substitutes Bertrand markets respond more quickly to an announced nominal shock. As products become weaker substitutes, however, an increased tendency for tacit collusion degrades convergence in Bertrand markets. This effect is particularly pronounced following a nominal shock. Our results suggest that in an oligopoly context variations in decision error costs dominate a ‘Strategic Substitutes Effect’ isolated in previous experimental research.

Keywords: Experiments; Strategic substitutes and strategic complements; Bertrand and Cournot markets (search for similar items in EconPapers)
JEL-codes: C9 D4 L4 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268111001132
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: https://EconPapers.repec.org/RePEc:eee:jeborg:v:80:y:2011:i:3:p:443-458

DOI: 10.1016/j.jebo.2011.04.008

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().