ADAPTIVE BEHAVIOR BY SINGLE-PRODUCT AND MULTIPRODUCT PRICE SETTING FIRMS IN EXPERIMENTAL MARKETS

Nikolaos Georgantzís () and Aurora García Gallego ()
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Aurora García Gallego: Universitat Jaume I
Authors registered in the RePEc Author Service: Aurora García-Gallego

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

Abstract: Using data obtained from experiments reported in García-Gallego (1998) and García- Gallego and Georgantzís (2001), we estimate a simple model of adaptive behavior which could describe pricing in a market whose demand conditions are unknown to the firms. Divergence between the limit of observed prices over time and theoretical predictions concerning multiproduct firms could be partially explained as a result of learning limitations associated with multiple task-oriented problem solving. However, optimal multiproduct pricing requires that subjects use two different kinds of rules: one concerning responses to prices charged by other players and another concerning pricing of own products. Even in a simple environment like the one studied here, subjects seem to be far more successful in learning a number than learning a rule.

Keywords: Adaptive Learning; Experimental Oligopoly; Multiproduct Firms. (search for similar items in EconPapers)
JEL-codes: C72 C9 L1 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2001-05
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