SFB 303 Discussion Paper No. B-170

Author: Keser, Claudia
Title: Some Results of Experimental Duopoly Markets with Demand Inertia
Abstract: In this paper experiments are described where students have played twice a duopoly game with demand inertia in the laboratory. The actually observed behavior is different from what is prescribed by the unique subgame perfect equilibrium. Comparisons of the behaviour when the game is played for the first and for the second time show that subjects tend to behave more cooperatively in the second plays: profits, prices and stability of prices are significantly higher in the second plays than in the first ones. In some markets almost Pareto optimal profits are obtained. In the second play we can distinguish clearly between "aggressive" and "cooperative" markets, where the cooperative ones can further be divided into "strongly cooperative" and "weakly cooperative" ones. The average price and price stability are used as indicators to classify the markets. Each market type shows a particular pattern of behavior.
JEL-Classification-Number: 215, 022, 026
Creation-Date: 1990
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