Economics at your fingertips  

Endogenous Price Leadership with Asymmetric Costs: Experimental Evidence

Miguel Fonseca ()

Studies in Microeconomics, 2019, vol. 7, issue 1, 59-74

Abstract: Abstract This paper presents experimental evidence on the action commitment game with cost-asymmetric firms in a differentiated-products Bertrand duopoly. Unlike its quantity-setting counterpart, the risk-dominant leader–follower equilibrium Pareto dominates the simultaneous-move equilibrium. This equilibrium also minimizes payoff differences between firms. Hence, one would expect the model to accurately capture behavior. The evidence partially supports the theory: low-cost firms price in the first period more often than high-cost firms, and depending on the treatment, between 40 and 57 per cent of all observations conform to equilibrium play. However, the modal timing outcome involved both firms delaying their pricing decision. This timing outcome is characterized by Nash play and some collusion. The high frequency of delaying decisions could be due to a desire to reduce strategic uncertainty.

Keywords: Commitment; Endogenous timing; Bertrand; price differentiation; experiment (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

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:

DOI: 10.1177/2321022219832736

Access Statistics for this article

More articles in Studies in Microeconomics
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2023-01-03
Handle: RePEc:sae:miceco:v:7:y:2019:i:1:p:59-74