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An Experimental Disposition of Alternative Bilateral Monopoly Models Under Conditions of Price Leadership

Author

Listed:
  • L. E. Fouraker

    (Pennsylvania State University, University Park, Pennsylvania)

  • S. Siegel

    (Pennsylvania State University, University Park, Pennsylvania)

  • D. L. Harnett

    (Pennsylvania State University, University Park, Pennsylvania)

Abstract

A controlled laboratory experiment was conducted to test human decision processes in an economic context. The economic model was bilateral monopoly, where one buyer is confronted by one seller. We employed the price leadership version, where one participant has an advantage over his adversary. The equilibrium solution (developed by Cournot and, later, by Bowley) for this situation is not Pareto optimal. This prediction is at variance with the observed central tendency of contracts negotiated under equal strength bilateral monopoly, so an established alternative hypothesis is available. The results, in general, support the Cournot-Bowley equilibrium solution. However, it is possible to shift the central tendency of contracts to the mid point of the Paretian optima by appropriate experimental controls.

Suggested Citation

  • L. E. Fouraker & S. Siegel & D. L. Harnett, 1962. "An Experimental Disposition of Alternative Bilateral Monopoly Models Under Conditions of Price Leadership," Operations Research, INFORMS, vol. 10(1), pages 41-50, February.
    • Handle: RePEc:inm:oropre:v:10:y:1962:i:1:p:41-50
    DOI: 10.1287/opre.10.1.41
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    Cited by:

    1. Grüner, S. & Hirschauer, N. & Mußhoff, O., 2015. "Potenzial verschiedener experimenteller Designs für die Politikfolgenabschätzung," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 50, March.
    2. Manfred Königstein & Marie Claire Villeval, 2005. "The Choice of the Agenda in Labor Negotiations: Efficiency and Behavioral Considerations," Post-Print halshs-00175021, HAL.
    3. Alexis Garapin & Michel Hollard & Stéphane Robin & Bernard Ruffieux, 2000. "L'inefficacité d'une chaîne de monopoles : une étude expérimentale en situation de négociation répétée," Économie et Prévision, Programme National Persée, vol. 145(4), pages 1-18.
    4. Königstein, Manfred & Villeval, Marie Claire, 2010. "Efficiency and behavioral considerations in labor negotiations," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 599-611, August.
    5. Elges, Carsten, 2016. "Die Preissetzung in Unternehmenskooperationen: Erste spieltheoretische Überlegungen," Arbeitspapiere 162, University of Münster, Institute for Cooperatives.

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