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Through Trial & Error to Collusion

Author

Listed:
  • Steffen Huck

    (Humboldt University, Berlin)

  • Hans-Theo Normann

    (Humboldt University, Berlin)

  • Joerg Oechssler

    (Humboldt University, Berlin)

Abstract

In this note we study a very simple trial & error learning process in the context of a Cournot oligopoly. Without any knowledge of the payoff functions players increase, respectively decrease, their quantity by one unit as long as this leads to higher profits. We show that this process converges to a collusive outcome.

Suggested Citation

  • Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Through Trial & Error to Collusion," Game Theory and Information 9811004, University Library of Munich, Germany, revised 24 Nov 1998.
    • Handle: RePEc:wpa:wuwpga:9811004
    Note: Pages: 12; figure included in the second file
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    Citations

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    Cited by:

    1. Dürsch, Peter & Kolb, Albert & Oechssler, Jörg & Schipper, Burkhard C., 2005. "Rage Against the Machines: How Subjects Learn to Play Against Computers," Bonn Econ Discussion Papers 31/2005, University of Bonn, Bonn Graduate School of Economics (BGSE).
    2. Altavilla, Carlo & Luini, Luigi & Sbriglia, Patrizia, 2006. "Social learning in market games," Journal of Economic Behavior & Organization, Elsevier, vol. 61(4), pages 632-652, December.
    3. repec:awi:wpaper:0423 is not listed on IDEAS
    4. Armstrong, Mark & Huck, Steffen, 2010. "Behavioral economics as applied to firms: a primer," MPRA Paper 20356, University Library of Munich, Germany.

    More about this item

    Keywords

    learning; game theory; oligopoly; collusion;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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