Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry

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Abstract

We report the results of a series of experimental Bertrand duopolies where firms have convex costs. Theoretically these duopolies are characterized by a multiplicity of Nash equilibria. Using a 2x2 design, we analyze price choices in symmetric and asymmetric markets under 2 information conditions: complete versus incomplete information about profits. We find that information has no effect in symmetric markets with respect to market prices and the time it takes for markets to stabilize. However, in asymmetric markets, complete information leads to higher average market prices and quicker convergence of price choices.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages31
Volume2009-87
Publication statusPublished - 2009

Publication series

NameCentER Discussion Paper
Volume2009-87

Keywords

  • Bertrand competition
  • convex costs
  • collusion
  • coordination
  • experimental economics

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