The effect of payoff tables on experimental oligopoly behavior

Gürerk, Özgür and Selten, Reinhard (2010): The effect of payoff tables on experimental oligopoly behavior.

Abstract

We explore the effects of the provision of an information-processing instrument - payoff tables - on behavior in experimental oligopolies. In one experimental setting, subjects have access to payoff tables whereas in the other setting they have not. It turns out that this minor variation in presentation has non-negligible effects on participants' behavior, particularly in the initial phase of the experiment. In the presence of payoff tables, subjects tend to be more cooperative. As a consequence, collusive behavior is more likely and quickly to occur.

• Item Type: MPRA Paper
• Language: English
• Keywords: Collusion; Cournot oligopoly; payoff tables; bounded rationality; framing; presentation effect
• Subjects: D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

References

Abbink, K. and Brandts, J. (2008). 24. Pricing in Bertrand competition with increasing marginal costs. Games and Economic Behavior, 63(1), 1-31.

Abbink, K. and Sadrieh, A. (1995). RatImage - Research assistance toolbox for computer aided human behavior experiments. Discussion Paper B-325, University of Bonn.

Bosch-Domènech, A. and Vriend, N. (2003). Imitation of successful behavior in Cournot markets. Economic Journal, April.

Charness, G., Frechette G.R., and Kagel, J.H. (2004). How robust is laboratory gift exchange? Experimental Economics, 7, 189-205.

Dolbear F.T., Lave, L.B., Bowman, G., Lieberman, A., Prescott, E., Rueter, F. and Sherman, R. (1968). Collusion in Oligopoly: An experiment on the effect of number and information. Quarterly Journal of Economics, 82, 240-259.

Fouraker, L. and Siegel, S. (1963): Bargaining behavior. New York: McGraw-Hill.

Huck, S., Normann, H., and Oechssler, J. (1999). Learning in Cournot oligopoly - An Experiment. Economic Journal, 109, C80-C95.

Huck, S., Normann, H., and Oechssler, J. (2004). Two are few and four are many: Number Effects in Experimental Oligopolies. Journal of Economic Behavior and Organization, 53, 435-446.

Offerman, T., Potters J., and Sonnemans, J. (2002). Imitation and belief learning in an oligopoly experiment. Review of Economic Studies, 69(241), 973-998.

Pruitt, D. G. (1967). Reward structure of cooperation: The decomposed prisoner's dilemma game. Journal of Personality and Social Psychology, 7, 21-37.

Requate, T., and Waichman, I. (2011) A profit table or a profit calculator? A note on the design of Cournot oligopoly experiments. Experimental Economics, 14, 36-46.

Saijo, T., and Nakamura, H. (1995) The "Spite" Dilemma in Voluntary Contribution Mechanism Experiments. Journal of Conflict Resolution, 39, 535-560.

Sauermann, H. and Selten, R. (1967). Ein Oligopolexperiment. In: H. Sauermann (ed.), Beiträge zur Experimentellen Wirtschaftsforschung, Vol. I, Tübingen, 9-59.