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Coarse Thinking and Collusion in Bertrand Duopoly with Increasing Marginal Costs

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Author Info
Siddiqi, Hammad

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Abstract

Mullainathan, Schwartzstein, & Shleifer [Quarterly Journal of Economics, May 2008] put forward a model of coarse thinking. The essential idea behind coarse thinking is that agents put situations into categories and then apply the same model of inference to all situations in a given category. We extend the argument to strategies in a game-theoretic setting and propose the following: Agents split the choice-space into categories in comparison with salient choices and then choose each option in a given category with equal probability. We provide an alternative explanation for the puzzling results obtained in a Bertrand competition experiment as reported in Abbink & Brandts [Games and Economic Behavior, 63, 2008]

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13516.

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Date of creation: 19 Feb 2009
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Handle: RePEc:pra:mprapa:13516

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Related research
Keywords: Laboratory experiments; Oligopoly; Price competition; Co-ordination games; Coarse Thinking;

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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This page was last updated on 2009-11-13.

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