What Model Best Describes Initial Choices in a Cournot Duopoly Experiment?

Mariano Gabriel Runco
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Mariano Gabriel Runco: Economics Department, Auburn University at Montgomery, Montgomery, AL, USA

International Journal of Applied Behavioral Economics (IJABE), 2016, vol. 5, issue 2, 31-45

Abstract: This paper tests empirically four models of bounded rationality using data from first responses in a Cournot duopoly experiment. Specifically, the models considered are Level-k, Quantal Response Equilibrium, Noisy Introspection and Logit Cognitive Hierarchy. It is found that the Level-k model (with proportions of Level-0, Level-1 and Level-8 given by 68.5%, 13.2% and 18.3% respectively) provides the best fit in terms of Log-Likelihood and BIC. Moreover, the robustness of our findings is corroborated analyzing subsets of the original data.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:igg:jabe00:v:5:y:2016:i:2:p:31-45

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