Two are few and four are many: number effects in experimental oligopolies

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract In this paper we investigate how the competitiveness of Cournot markets varies with the number of …rms in an industry. We review previous Cournot experiments in the literature. Additionally, we conduct a new series of experiments studying oligopolies with two, three, four, and …ve …rms in a uni…ed frame. With two …rms we …nd some collusion. Three-…rm oligopolies tend to produce outputs at the Nash level. Markets with four or …ve …rms are never collusive and typically settle at or above the Cournot outcome. Some of those markets are actually quite competitive with outputs close to the Walrasian outcome. Terms of use: Documents inJEL-classi…cation numbers: L13, C92, C72.¤ We are indebted to Wieland Müller and Dirk Engelmann for help in conducting the experiments, and to Claudia Keser for suggesting the title of the paper. Doug Davis made very useful comments on an early draft. We are also grateful for …nancial support by the Deutsche Forschungsgemeinschaft, grant OE-198/1/1.

Is there a U-shaped relation between competition and investment?

“…Experimental investigations of asymmetric Cournot duopolies are rare (Mason et al 1992, Mason andPhillips 1997). Contrary to the corresponding symmetric duopoly games (Huck et al 2004b), they tend to reveal outputs above the equilibrium. Using (2), we obtain the following predictions for fixed values of b.…”

Cooperation in small groups: the effect of group size

“…Even here, there is evidence of a negative effect of group size on collusion beyond that predicted. Huck et al (2004), for instance, study the textbook homogeneous goods Cournot model with two, three, four or five firms per market, where the equilibrium prediction is that quantities are higher in larger markets. In the experimental two-firm markets there is evidence of collusion and firms produce less than the Nash level.…”

Strategic Buyers and Market Entry

“…Only 17% of the fixed sellers in the first experiment ever chose a price below the mobile sellers' marginal costs. Nevertheless, fixed sellers obviously condition their prices on the degree of competition 7 Note that collusion is unlikely in markets with three or four sellers, see Huck et al (2004).…”