Bertrand competition under decreasing returns involves a wide interval of pure strategy equilibrium prices. We first present results of experiments in which two, three and four identical firms repeatedly interact in this environment. Less collusion with more firms leads to lower average prices. With more than two firms, the predominant market price is 24, a price not predicted by conventional equilibrium theories. This phenomenon can be captured by a simple imitation model and by a focal point explanation. For the long run, the model predicts that prices converge to the Walrasian outcome. We then use data from three new treatments to properly test the imitation model against the focal point notion.

Running Head: Automatic imitation in a strategic context Automatic imitation in a strategic context: Players of Rock-Paper-Scissors imitate opponents ’ gestures �

Transparency relates to communication and information about the conduct of firms. Transparency can relate to the past, the present, and the future and it can vary in format, content, and reliability. In this paper I review experimental evidence which relates to the impact of transparency on the competitiveness of markets. This paper was prepared for the Encore Workshop on “Experiments for Antitrust Policies”,

I consider markets in which eight firms compete deciding simultaneously on price and quantity with a given capacity. I got eight independent experimental data. At any of 65 rounds the same eight firms met each other in the same market. If a firm made high enough losses it went bankrupt and left the market. In this case capacity was distributed among surviving firms following a proportional profit rule. Thedata exhibit strong cycles in price and quantity offered that resemble Edgeworth cycles. JEL classification: C91, D43

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We study the relation between the number of firms and price-cost margins under price competition with uncertainty about competitors ’ costs. We present results of an experiment in which two, three and four identical firms repeatedly interact in this environment. In line with the theoretical prediction, market prices decrease with the number of firms, but on average stay above marginal costs. Pricing is less aggressive in duopolies than in triopolies and tetrapolies. However, independently from the number of firms, pricing is more aggressive than in the theoretical equilibrium. Both the absolute and the relative surpluses increase with the number of firms. Total surplus is close to the equilibrium level, since enhanced consumer surplus through lower prices is counteracted by occasional displacements of the most efficient firm in production.

In an experimental standard Cournot oligopoly we test the importance of models of behavior characterized by imitation of successful behavior. We find that the players appear to be rather reluctant to imitate.

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I report results of an experiment designed to study the relation between the process of information search and learning in a Cournot oligopoly, with limited a priori information. Different theories of learning have been applied to this setting, each yielding a specific market outcome in the long run, and postulating specific informational requirements. By allowing players to choose the information they wish to acquire, and controlling for these choices, I study the features of the learning model actually followed by the subjects, and the relation between the information they gather and the market behavior they adopt. According to my results, learning appears to be a composite process, in which different components coexist. Belief learning seems to be the leading element, as subjects try to form expectations about their opponents ’ future actions and to best reply to them. When subjects also look at the strategies individually adopted by their competitors, though, they tend to imitate the most successful behavior, which makes markets more competitive. Finally, reinforcement learning also plays a nonnegligible role, as subjects tend to favor strategies that have yielded higher profits in the past. I show that these different elements may be usefully incorporated into a more sophisticated learning model, shaped after self tuning EWA learning model.