Experimentally observed imitation and cooperation in price competition on the circle

Abstract

This paper reports an experiment on a location game, the so-called "Price competition on the circle." There are n symmetric firms equidistantly located on a circle. Consumers are uniformly distributed. Each consumer buys one unit from that firm whose price, including the cost of transportation, is the lowest, provided such a price is below a maximum willingness to pay. Experiments, extended over 200 periods, were run with 3, 4, and 5 participants. Subjects did not receive any information about the relationship between prices and profits, but they received feedback on prices and profits of two neighbors after each period. The evaluation compares predictions derived from imitation equilibrium and Cournot equilibrium, as well as symmetric joint-profit maximization. The results show that behavior is influenced by imitative tendencies and attempts to cooperate.  2004 Elsevier Inc. All rights reserved. JEL classification: C72; C92; L13; R32

Imitation with intention and memory: An experiment

“…Overall, 39% of all decisions in the experiment show an intention to imitate, but are consistent neither with genuine learning nor with randomization strategies. This result complements previous experimental research (e.g., Apesteguia/Huck /Oechssler, 2006;Selten/Apesteguia, 2002) that focussed on showing that behavior was consistent with an imitation strategy, but could not show whether it was actually driven by imitation motives.…”

Naive learning and cooperation in network experiments

“…Huck, Normann, and Oechssler (1999) and Offerman, Potters, and Sonnemans (2002) use experiments to show that players do imitate and tend to converge to the Walras equilibrium in oligopolies if information about other players is available. Selten and Ostmann (2001) develop the theoretical concept of an imitation equilibrium which is studied in Selten and Apesteguia (2005) with the help of an experiment based on an oligopoly with spatial competition. Selten and Apesteguia find that, indeed, features of the imitation equilibrium describe parts of actual behaviour better than the Cournot Nash concepts.…”

“…Kosfeld (2004) provides an exhaustive summary of networks experiments. Close to our study are those of Keser, Ehrhart, andBerninghaus (1998), Cassar (2002), and Selten and Apesteguia (2005). Keser, Ehrhart, and Berninghaus (1998) study how the structure of the network affects selection of Pareto and risk dominant equilibria in coordination games.…”

“…Selten and Apesteguia (2005) study an oligopoly with a spatially differentiated product. They are, however, not interested in the relation between learning from own experience versus imitation.…”

Stochastic stability on general state spaces

“…Chong et al, 2006;Selten and Apesteguia, 2005). The possibility of multiple resting points for such processes naturally leads one to question which of these stable states is more plausible from an economic perspective.…”