Experimental Duopoly Markets with Demand Inertia

Game-Playing Experiments and the Strategy Method

  • Claudia Keser

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 391)

Table of contents

  1. Front Matter
    Pages I-X
  2. Claudia Keser
    Pages 1-4
  3. Claudia Keser
    Pages 5-17
  4. Claudia Keser
    Pages 18-21
  5. Claudia Keser
    Pages 22-37
  6. Claudia Keser
    Pages 38-110
  7. Claudia Keser
    Pages 125-132
  8. Claudia Keser
    Pages 133-137
  9. Back Matter
    Pages 138-154

About this book

Introduction

This report portrays the results of experimental research on dynamic duopoly markets with demand inertia. Two methods of experimentation are studied: game-playing experiments where subjects interact spontaneously via computer terminals, and computer tournaments between strategies designed by subjects. The principal aim of this study is the understanding of boundedly rational decision making in the dynamic duopoly situation. 1. 1 Motivation The experiments examine a multistage duopoly game where prices in each period are the only decision variables. Sales depend on current prices and also on past sales (demand inertia). Applying the game-theoretic concept of subgame perfect equilibrium, the game is solved by backward induction. The result is a uniquely determined system of decision rules. However, we can hardly expect that human beings behave according to the equilibrium strategy of this game. It is unlikely that subjects are able to compute the equilibrium. And even if a subject is able to compute it, he might not make use of this knowledge. Only if he expects the others to behave according to the equilibrium, it is optimal for him to play the equilibrium strategy. We have evidence from several earlier experimental studies on oligopoly markets that, even in less complex oligopoly situations where the equilibrium solutions are very easy to compute, human behavior often is different from what is prescribed by normative theory. ! Normative theory is based on the concept of ideal rationality. However, human capabilities impose cognitive limits on rationality.

Keywords

Duopolmärkte Duopoly Markets Experimental Economics Experimentelle Wirtschaftsforschung Game Theory Monopol Spieltheorie

Authors and affiliations

  • Claudia Keser
    • 1
  1. 1.Institut für Gesellschafts- und WirtschaftswissenschaftenUniversität BonnBonn 1Germany

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-642-48144-4
  • Copyright Information Springer-Verlag Berlin Heidelberg 1992
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Springer Book Archive
  • Print ISBN 978-3-540-56090-6
  • Online ISBN 978-3-642-48144-4
  • Series Print ISSN 0075-8442
  • About this book