DUOPOLY EXPERIMENTATION: COURNOT AND BERTRAND COMPETITION

Amparo Urbano and María Dolores Alepuz Domenech
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María Dolores Alepuz Domenech: Universitat de València

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper analyzes how leaming behaviour can modify the outcome of competition in an industry facing demand uncertainty. We consider a duopoly game where firms have imperfect information about market demand and leam through observing prices (Coumot competition) or sales (Bertrand) . The main body of the paper consists in showing how duopoly experimentation is affected by the type of market competition. We find that, if the goods are substitutes, firms will experiment more under Bertrand than under Coumot. If the goods are complements, the result is reversed. Furthermore, there is less experimentation under Coumot with product substitution.

Pages: 55 pages
Date: 1991-01
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http://www.ivie.es/downloads/docs/wpasad/wpasad-1991-07.pdf Fisrt version / Primera version, 1991 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1991-07

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