Capacity Choices and Price Competition in Experimental Markets

Vital Anderhub, Werner Güth (), Ulrich Kamecke and Hans-Theo Normann

Experimental Economics, 2003, vol. 6, issue 1, 27-52

Abstract: We report on experimental duopoly markets with heterogeneous goods. In these markets, sellers first choose capacities and then prices. While capacities remain fixed for either five or ten periods, prices have to be chosen in every period. The experiments starts with two sets of exogenously predetermined capacities. Independently of the distribution of capacities is, a unique pure-strategy in prices is subgame perfect. In equilibrium, capacities should correspond to the Cournot prediction. Given capacities, price-setting behavior is in general consistent with the theory. Average capacities converge above the Cournot level. Capacities converge at the industry level but are somewhat dispersed. Sellers rarely manage to cooperate. Copyright Kluwer Academic Publishers 2003

Keywords: Bertrand-Edgeworth; Cournot; experiments (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (23)

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DOI: 10.1023/A:1024248608752

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