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Playing Cournot Although they Shouldn't - Endogenous Timing in Experimental Duopolies with Asymmetric Cost

Posted: 2 Sep 2004  

Miguel Alexandre Fonseca

University of London - Department of Economics

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Hans-Theo Normann

Heinrich Heine University Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods

Abstract

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

Suggested Citation

Fonseca, Miguel Alexandre and Huck, Steffen and Normann, Hans-Theo, Playing Cournot Although they Shouldn't - Endogenous Timing in Experimental Duopolies with Asymmetric Cost. Economic Theory, Vol. 25, No. 3, pp. 669-677, April 2005. Available at SSRN: https://ssrn.com/abstract=585365

Miguel Alexandre Fonseca

University of London - Department of Economics ( email )

Royal Holloway College
Egham
Surrey, Surrey TW20 0EX
United Kingdom

Steffen Huck

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctpshu/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Hans-Theo Normann (Contact Author)

Heinrich Heine University Dusseldorf - Department of Economics ( email )

Duesseldorf
Germany

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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