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To commit or not to commit : Endogenous timing in experimental duopoly markets

Author

Listed:
  • Huck, S.
  • Müller, W.

    (Tilburg University, School of Economics and Management)

  • Normann, H.T.

Abstract

In this paper, we experimentally investigate the extended game with action commitment of Hamilton and Slutsky (1990). In their duopoly game, firms can choose their quantities in one of two periods before the market clears. If a firm commits to a quantity in period 1 it does not know whether the other firm also commits early. By waiting until period 2, a firm can observe the other firm's period 1 action. Hamilton and Slutsky predict the emergence of endogenous Stackelberg leadership. Our data, however, does not confirm the theory. While Stackelberg equilibria are extremely rare we often observe endogenous Cournot outcomes and sometimes collusive play. This is partly driven by the fact that endogenous Stackelberg followers learn to behave in a reciprocal fashion over time, i.e., they learn to reward cooperation and to punish exploitation.
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Suggested Citation

  • Huck, S. & Müller, W. & Normann, H.T., 2002. "To commit or not to commit : Endogenous timing in experimental duopoly markets," Other publications TiSEM 52f12df4-ce93-42ae-b8f4-5, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:52f12df4-ce93-42ae-b8f4-5e0c1f8f6e2b
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    File URL: https://pure.uvt.nl/ws/portalfiles/portal/515625/Commit.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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

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