From Imitation to Collusion - A Comment
Alex Roomets and
No 588, Working Papers from University of Heidelberg, Department of Economics
In oligopoly, imitating the most successful competitor yields very competitive outcomes. This theoretical prediction has been conﬁrmed experimentally by a number of studies. A recent paper by Friedman et al. (2015) qualiﬁes those results in an interesting way: while they replicate the very competitive results for the ﬁrst 25 to 50 periods, they show that when using a much longer time horizon of 1200 periods, results slowly turn to more and more collusive outcomes. We replicate their result for duopolies. However, with 4 ﬁrms none of our oligopolies becomes permanently collusive. Instead, the average quantity always stays above the Cournot-Nash equilibrium quantity. Thus, it seems that “four remain many” even with 1200 periods.
Keywords: imitation; experiment. (search for similar items in EconPapers)
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