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Learning to collude: An experiment in convergence and equilibrium selection in oligopoly

Dixon, Huw David, Sbriglia, Patrizia and Somma, Ernesto 2006. Learning to collude: An experiment in convergence and equilibrium selection in oligopoly. Research in Economics 60 (3) , pp. 155-167. 10.1016/j.rie.2006.08.001

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The paper considers a simple oligopoly model where firms know their own and the average pay-off in the industry. Firms choose decision rules for trading. The theory predicts that there are three types of Nash equilibria in this game (collusive, Cournot and Stackelberg). Our experiments test the selection process. We find that there is clear evidence of convergence to an equilibrium, and whilst both Cournot and collusive outcomes were selected, the collusive equilibrium is more common. The experimental results also give insights into the process of individual learning, confirming that subjects follow aspiration rules rather than reinforcement rules.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Uncontrolled Keywords: Oligopoly; Learning; Experiment
Publisher: Elsevier
ISSN: 1090-9443
Last Modified: 04 Jun 2017 04:30

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