Price Competition and Market Concentration: An Experimental Study
Martin Dufwenberg () and
Additional contact information
Martin Dufwenberg: Department of Economics, Postal: Stockholm University, 106 91 Stockholm, Sweden
No 1998:8, Working Paper Series from Uppsala University, Department of Economics
The classical price competition model (named after Bertrand), prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the "Bertrand Paradox". Many theoretical problems with the original model have been considered as an explanation of the paradox in the literature. In this paper we experimentally investigate a model which is immune to the theoretical critique of the original model. We find, nevertheless, that the outcome does depend on the number of competitors: the Bertrand solution does not predict well when the number of competitors is two, but after some opportunities for learning are provided it tends to predict well when the number of competitors is three or four. A bounded rationality explanation of this is suggested.
Keywords: Price competition; Bertrand model; market concentration; experiment; learning (search for similar items in EconPapers)
JEL-codes: C90 D43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Published in International Journal of Industrial Organization, 2000, pages 7-22.
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.nek.uu.se/pdf/1998wp8.pdf [302 Found]--> https://www.nek.uu.se/pdf/1998wp8.pdf)
Journal Article: Price competition and market concentration: an experimental study (2000)
Working Paper: Price Competition and Market Concentration: An experimental Study (1999)
Working Paper: Price Competition and Market COncentration: An Experimental Study (1998)
Working Paper: Price competition and market concentration: An experimental study (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:1998_008
Access Statistics for this paper
More papers in Working Paper Series from Uppsala University, Department of Economics Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Ulrika Öjdeby ().