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Is a “Firm” a Firm? A Stackelberg Experiment

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  • Andreas Hildenbrand

    (University of Giessen)

Abstract

Industrial organization is mainly concerned with the behavior of large firms. Experimental industrial organization therefore faces a problem: How can firms be brought into the laboratory? The main approach relies on framing: Call individuals “firms”! This experimental approach is not in line with modern industrial organization, according to which a firm’s market behavior is also determined by its organizational structure. In this paper, a Stackelberg experiment is considered in order to answer the question whether framing individual decision making as organizational decision making or implementing an organizational structure is more effective in generating profit-maximizing behavior. Firms are either represented by individuals or by teams. I find that teams’ quantity choices are more in line with the assumption of profit maximization than individuals’

Suggested Citation

  • Andreas Hildenbrand, 2012. "Is a “Firm” a Firm? A Stackelberg Experiment," MAGKS Papers on Economics 201229, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201229
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    More about this item

    Keywords

    industrial organization; Stackelberg game; individual behavior; team behavior; framing; experimental economics.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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