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38
HOW MUCH COLLUSION? A METAANALYSIS OF OLIGOPOLY EXPERIMENTS
, 2007
"... Oligopoly has been among the first topics in experimental economics. Over half a century, some 150 papers have been published. Each individual paper was interested in demonstrating one effect, but in order to do so, experimenters had to specify many more parameters. Thus they have generated a huge b ..."
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Cited by 24 (6 self)
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Oligopoly has been among the first topics in experimental economics. Over half a century, some 150 papers have been published. Each individual paper was interested in demonstrating one effect, but in order to do so, experimenters had to specify many more parameters. Thus they have generated a huge body of evidence, untapped so far. This metaanalysis makes this evidence available. More than 100 of the papers lend themselves to calculating an index of collusion. The database behind this paper covers some 500 different settings. The experimental results may be normalized as a percentage of the span between the Walrasian and the Pareto outcomes. In the same way, results may be expressed as a percentage of the distance between the Nash and the Pareto outcomes. For each and every one of the parameters, these two indices make it possible to answer two questions: How far is the market outcome away from the competitive equilibrium? And how good is the Nash prediction? Most importantly, however, the metaanalysis sheds light on how features of the experimental setting interact with each other. Most main effects and many interaction effects are indeed statistically significant.
On the nature of reciprocal motives
 Economic Inquiry
, 2005
"... Data from 692 subjects in 11 experimental treatments provide a systematic exploration of the existence and nature of reciprocal behavior in twoperson games. The experimental design discriminates between motivations of reciprocity and (nonreciprocal) otherregarding preferences. The existence of po ..."
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Cited by 23 (6 self)
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Data from 692 subjects in 11 experimental treatments provide a systematic exploration of the existence and nature of reciprocal behavior in twoperson games. The experimental design discriminates between motivations of reciprocity and (nonreciprocal) otherregarding preferences. The existence of positive reciprocity is found to be dependent on the level of social distance but not the level of monetary payoff. The larger context in which a decision is made is found to have a significant effect on negative reciprocity. These findings on payoff levels, social distance, decision context, and reciprocity have implications for both theoretical modeling and experimental design.
An experimental study of price dispersion
 Games and Economic Behavior
, 2006
"... Foundation and the Woodrow Wilson School. Orzen's work was supported by the Gottlieb Daimler und Karl ..."
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Cited by 23 (0 self)
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Foundation and the Woodrow Wilson School. Orzen's work was supported by the Gottlieb Daimler und Karl
Learning in Games with Unstable Equilibria
, 2005
"... We propose a new concept for the analysis of games, the TASP, which gives a precise prediction about nonequilibrium play in games whose Nash equilibria are mixed and are unstable under fictitious playlike learning processes. We show that, when players learn using weighted stochastic fictitious pla ..."
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Cited by 21 (1 self)
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We propose a new concept for the analysis of games, the TASP, which gives a precise prediction about nonequilibrium play in games whose Nash equilibria are mixed and are unstable under fictitious playlike learning processes. We show that, when players learn using weighted stochastic fictitious play and so place greater weight on more recent experience, the time average of play often converges in these “unstable” games, even while mixed strategies and beliefs continue to cycle. This time average, the TASP, is related to the best response cycle first identified by Shapley (1964). Though conceptually distinct from Nash equilibrium, for many games the TASP is close enough to Nash to create the appearance of convergence to equilibrium. We discuss how these theoretical results may help to explain data from recent experimental studies of price dispersion.
The Dynamics of Price Dispersion or Edgeworth Variations
 Journal of Economic Dynamics and Control
, 2005
"... Computer simulations, as well as traditional and recent theory, suggest hypotheses on the dynamics of dispersed prices that we test on existing laboratory data. As predicted in some variations of the Edgeworth hypothesis, the posted price data exhibit a significant cycle. Relative to the unique stat ..."
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Cited by 18 (1 self)
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Computer simulations, as well as traditional and recent theory, suggest hypotheses on the dynamics of dispersed prices that we test on existing laboratory data. As predicted in some variations of the Edgeworth hypothesis, the posted price data exhibit a significant cycle. Relative to the unique stationary distribution, the empirical distribution has excess mass in a price interval that moves downward over time until it approaches the lower boundary of the stationary distribution. Then the excess mass jumps upward and the downward cycle resumes. The amplitude of the cycle seems fairly constant over the longer experimental sessions. Of the simulations we consider, the one closest to Edgeworth’s 1925 account, a hybrid of gradient dynamics and logit dynamics, seems to best reproduce the observed dynamics. Acknowledgements: Financial support for the laboratory data collection was provided by the NSF under grants SBR9617917 and SBR9709874. We are also grateful to Ed Hopkins and Jörgen Weibull for helpful discussions. The second author thanks CeNDEF for sponsoring the
The dynamic instability of dispersed price equilibria
, 2007
"... We examine whether price dispersion is an equilibrium phenomenon or a cyclical phenomenon. We develop a finite strategy model of price dispersion based on the infinite strategy model of Burdett and Judd (1983). Adopting an evolutionary standpoint, we examine the stability of dispersed price equilibr ..."
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Cited by 7 (2 self)
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We examine whether price dispersion is an equilibrium phenomenon or a cyclical phenomenon. We develop a finite strategy model of price dispersion based on the infinite strategy model of Burdett and Judd (1983). Adopting an evolutionary standpoint, we examine the stability of dispersed price equilibrium under perturbed best response dynamics. We conclude that when both sellers and consumers participate actively in the market, all dispersed price equilibria are unstable leading us to interpret price dispersion as a cyclical process. For a particular case of the model, we prove the existence of a limit cycle.
Imitation of successful behaviour in cournot markets
 Economic Journal
"... In an experimental standard Cournot oligopoly we test the importance of models of behaviour characterised by imitation of successful behaviour, in particular when the environment becomes more complex. We find that the players do not rely more on imitation in more demanding environments. We explain ..."
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In an experimental standard Cournot oligopoly we test the importance of models of behaviour characterised by imitation of successful behaviour, in particular when the environment becomes more complex. We find that the players do not rely more on imitation in more demanding environments. We explain that the different pattern of output decisions in such environments seems predominantly related to a general disorientation of the players, and more specifically to a significant decrease of bestresponses. Imitation has played an important role in the recent literature on learning and adaptive behaviour in economics.1 Imitation seems easy and straightforward, it does not use particularly many cognitive skills and it does not require much information. Imitation certainly qualifies as a ‘fast and frugal heuristics for making decisions ’ (Gigerenzer and Goldstein, 1996). Not surprisingly, conventional wisdom asserts that imitation of the successful behaviour of others is likely in situations with little information or understanding. Yet imitation, although deemed easy, need not be a realistic mode of behaviour. To assess the extent of imitative behaviour, we set up an experimental symmetric Cournot market under different
Testing the TASP: An Experimental Investigation of Learning in Games with Unstable Equilibria
, 2010
"... We report experiments studying mixed strategy Nash equilibria that are theoretically stable or unstable under learning. The Time Average Shapley Polygon (TASP) predicts behavior in the unstable case. We study two versions of RockPaperScissors that include a fourth strategy, Dumb. The unique Nash ..."
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Cited by 5 (2 self)
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We report experiments studying mixed strategy Nash equilibria that are theoretically stable or unstable under learning. The Time Average Shapley Polygon (TASP) predicts behavior in the unstable case. We study two versions of RockPaperScissors that include a fourth strategy, Dumb. The unique Nash equilibrium is identical in the two games, but the predicted frequency of Dumb is much higher in the game where the NE is stable. Consistent with TASP, the observed frequency of Dumb is lower and play is further from Nash in the high payoff unstable treatment. However, Dumb is played too frequently in all treatments.
Blaming the Messenger: Notes on the Current State of Experimental Economics
, 2009
"... Ken Binmore and Avner Shaked are highly respected economists, wellknown for their analytical contributions and breadth of knowledge. Moreover, they have actively participated in experimental economics for many years. However, their critique of the current state of experimental economics in general, ..."
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Ken Binmore and Avner Shaked are highly respected economists, wellknown for their analytical contributions and breadth of knowledge. Moreover, they have actively participated in experimental economics for many years. However, their critique of the current state of experimental economics in general, and of Ernst Fehr and Klaus Schmidt’s presentation of their theory of inequality aversion in particular, are deeply flawed. Moreover, their conception of the relationship between theory and experiment and their interpretation of the empirical evidence on otherregarding preferences are untenable. Binmore and Shaked set the problem as follows: Should we follow those experimental economists who seek recognition of their subject as a science by adopting the scientific standards that operate in neighboring disciplines like biology or psychology? Or should we... [treat] experimental results as just one more rhetorical tool to be quoted when convenient in seeking to convert others to whatever your own point of view may be? Binmore and Shaked in fact identify only one aspect of scientific standards on which experimentalists are purportedly wanting, their failure to adopt “a more skeptical attitude when farreaching claims about human behavior are extrapolated from very slender data. ” We maintain that experimental economics has not been faulty in this respect.
Modeling the Search for the Least Costly Opportunity
, 2005
"... Modeling the Search for the Least Costly Opportunity With the continuing growth in the number of opportunities available at virtual stores over the Internet there is also a growing demand for the services of computer programs capable of scanning a large number of stores in a very short time. We assu ..."
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Modeling the Search for the Least Costly Opportunity With the continuing growth in the number of opportunities available at virtual stores over the Internet there is also a growing demand for the services of computer programs capable of scanning a large number of stores in a very short time. We assume that the cost associated with each scan is linear in the number of stores scanned, and that the resulting list of price quotes is not always satisfactory to the customer, in which case an additional scan is performed, and so on. In such a reality the customer, wishing to minimize her expected cost, must specify the requested sample size and a rule (control limit) to stop the search. In the context of search theory, the above model can be categorized as “fixedsamplesize, sequential, with infinite horizon”. According to this model the expected search cost is a function of two decision variables: the sample size and the control limit. We prove that for arbitrary sample size the expected search cost is either quasiconvex or strictly decreasing in the control limit, and that the optimal expected search cost is quasiconvex in the sample size. These properties allow an efficient calculation of the optimal policy. We also develop analytic formulas to calculate the cost’s variance, allowing customers to choose a slightly higher expected cost if there is a considerable decrease in the variance. Finally, we present detailed examples for price quotes that are either uniform or exponential. 21.