Wednesday, December 9, 2009
Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry
Posted by D. Daniel Sokol
Cédric Argenton, Tilburg Law and Economics Center (TILEC), Tilburg University - Econ, and Wieland Müller, Tilburg - Econ undertake work in Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry.
ABSTRACT: We report the results of a series of experimental Bertrand duopolies where firms have convex costs. Theoretically, these duopolies are characterized by a multiplicity of Nash equilibria. Using a 2x2 design, we analyze price choices in symmetric and asymmetric markets under two information conditions: complete versus incomplete information about profits. We find that information has no effect in symmetric markets with respect to market prices and the time it takes for markets to stabilize. However, in asymmetric markets, complete information leads to higher average market prices and quicker convergence of price choices.