24

Klaus Abbink and Jordi Brandts

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We study the relation between the number of firms and market power in experimental oligopolies. Price competition under decreasing returns involves a wide interval of pure strategy equilibrium prices. We present results of an experiment in which two, three and four identical firms repeatedly interact in this environment. Less collusion with more firms leads to lower average prices. With more than two firms, the predominant market price is 24. A simple imitation model captures this phenomenon. For the long run, the model predicts that prices converge to the Walrasian outcome, but for the intermediate term the modal price is 24

Keywords: Laboratory experiments; industrial organisation; oligopoly; price competition; co-ordination games; learning (search for similar items in EconPapers)
JEL-codes: C72 C90 D43 D83 L13 (search for similar items in EconPapers)
Pages: 26
Date: 2002-07-01
New Economics Papers: this item is included in nep-exp
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Working Paper: 24 (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:523.02

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