Stability of the Cournot Process: Experimental Evidence
15 Pages Posted: 25 Nov 1997
Date Written: July 22, 1997
We report results of a series of experiments designed to test the stability of the best reply process. With linear demand and cost functions, the process is stable if and only if there are less than three firms in the market. However, we find no experimental evidence of such instability in a four firm oligopoly. Moreover, there are no differences between a market which theoretically should not converge to Nash equilibrium and one which should converge because of inertia.
JEL Classification: L13, C72
Suggested Citation: Suggested Citation