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The experiments on Cournot competition, where sellers choose quantities
to produce have focused mainly on two issues: Whether subjects do play
the Nash predictions or not and how subjects learn to play given
different information conditions.
Holt (1985) and Mason, Phillips, and Redington(1991) found in their
experiments that the quantity choices of players typically fall between
the Cournot and collusive levels in multi-period duopoly games.
Holt and Villamil (1986) in their four seller sessions gave no demand
information to the sellers. They found that the mean and median prices
were near the competitive level, far away from the Cournot level.
Binger et al. (1990) ran a forty-period Cournot market experiment with
complete demand information. Averaging across sessions and periods, the
market quantities approximate the Cournot levels for the
two-seller-no-communication sessions, and quantities were midway between
competitive and Cournot levels for the five-seller-no-communication
Cox and Walker (1998) investigates different models of learning using a
Cournot market environment. In particular they were interested in whether
subjects eventually converge to the predicted Nash equilibrium responses
derived for Cournot competition. In addition they were also in the path
of play that subjects follow in Cournot duopoly markets. They also looked
at the stability issues of the equilibrium. They used different marginal
cost structures in their experiment and both fixed and random matching of
subjects. The experiments where the learning models predict convergence
to the stable interior Nash equilibria, subjects predominantly chose the
Nash equilibrium quantities after only a few periods, and the deviations
from Nash Equilibrium were very small. In contrast, the cases where the
learning models predict convergence to stable boundary Nash equilibrium,
subjects seldom chose quantities that were part of the interior or
Hück, Normann, and Oechssler (1999) looked at imitation as a possible
learning mechanism in Cournot oligopoly. In their experiment four players chose output in the interval [0,100], for forty periods. They compare behavior under four conditions, designed to test learning theories which require different kinds of information. They had the following four information treatments: Under the ?BEST? treatment, demand, cost and total industry output was shown to each player; Under ?FULL,? in addition to demand and cost, other firms? chosen quantities and profits were shown; Under ?IMIT? only the other firms? quantities and profits were shown; Finally under the ?NOIN,? treatment each player was shown only his own profit. They found that in the ?BEST? condition, outputs move towards the Cournot-Nash predictions. In ?FULL? outputs go up towards the Walrasian predictions. In ?IMIT? they found outputs to have high fluctuations.
Overall, multi-period Cournot quantity-choice experiments show that
outcomes fall on both sides of the Cournot prediction, and in some
cases show signs of near perfect collusions. When there are more than
two sellers, outcomes are found often to be more competitive than the
Cournot predictions. In terms of the behavior observed in quantity
setting experiments the experiments mainly show signs of best-reply
learning and imitation learning suggesting that imitation can be quite
an important and practical form of learning.
- Binger,Brian R., Elizabeth Hoffman, Gary D. Libecap, and Keith M. Shachat (1990). An experimetric study of the Cournot theory of firm
behavior. Working paper. University of Arizona.
- Cox, James C., and Walker M. (1998). Learning to Play Cournot
Duopoly Strategies. Journal of Economic Behavior and Organization
- Holt, Charles A. (1985). An experimental test of the consistent conjectures hypothesis. American Economic Review 75: 314-25.
- Holt, Charles A., and Anne Villamil (1986). A laboratory experiment with a single-person cobweb. Atlantic Economic Journal 14: 51-4.
- Hück, Steffen, Hans-Theo Normann, and Jörg Oechssler (1999). Learning in Cournot Oligopoly: an Experiment. Economic Journal, 109: 80-95.
- Mason, Charles F., Owen R. Phillips, and Douglas B. Redington
(1991). The role of gender in a non-cooperative game. Journal of
Economic Behavior and Organization 15:215-35