Playing Cournot Although they Shouldn't - Endogenous Timing in Experimental Duopolies with Asymmetric Cost
Miguel Alexandre Fonseca
University of London - Department of Economics
University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)
Heinrich Heine University Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods
Economic Theory, Vol. 25, No. 3, pp. 669-677, April 2005
In this note, we experimentally investigate the extended game with action commitment in a Cournot duopoly with asymmetric cost. Risk dominance considerations allow to select a unique equilibrium in which the low-cost firm is the Stackelberg leader. The data, however, do not support the theory as simultaneous-move play is modal. Average output choices are in line with the Cournot equilibrium. This suggests that Cournot is a much more robust predictor for competition in markets than theory suggests.
Keywords: Commitment, endogenous timing, experimental economics, risk dominance, Stackelberg
JEL Classification: C72, C92, D43
Date posted: September 2, 2004
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