Imitation and Belief Learning in an Oligopoly Experiment

Abstract

We examine the force of three types of behavioural dynamics in quantity-setting triopoly experiments: (1) mimicking the successful firm, (2) rules based on following the exemplary firm, and (3) rules based on belief learning. Theoretically, these three types of rules lead to the competitive, the collusive, and the Cournot-Nash outcome, respectively. In the experiment we employ three information treatments, each of which is hypothesized to be conducive to the force of one of the three dynamic rules. To a large extent, the results are consistent with the hypothesized relationships between treatments, behavioural rules, and outcomes.

Subject-specific performance information can worsen the tragedy of the commons: Experimental evidence

“…Since we are interested in assessing the main impact of subject-specific performance information, in this work we deal mostly with inferences about mean outcomes at the treatment level. 20 The critical value for a one-sided test at the 10% level equals 2.61, while the obtained t-statistic equals 2.32.! 21 Both skewness-kurtosis and Shapiro-Francia tests support the assumption of Gaussian residuals for the efficiency paired time-series and Gini index paired time-series at the 70% and 50% level respectively, for both the 20 rounds and last 10 rounds.…”

“…As shown by Vega-Redondo (1997) and Alós-Ferrer and Ania (2005), if all subjects follow 'imitate the best', the unique stochastically stable state of the process is the OA outcome of the constituent CPR game, and, as proved by Offerman et al (2002) if all subjects use the 'follow the exemplary' rule, the unique stochastically stable state of the process is the PE outcome of the constituent CPR game. Moreover, the 'imitate the best' rule can be used at minimal decision costs in comparison to 'follow the exemplary', since subjects receive the information processed in such a way that the comparison of payoffs across agents and the identification of the associated use level are straightforward.…”

“…Consider the introduction of some perturbation to the process, whose purpose, as in 'imitate the best', is to introduce some dynamics to the system. Then the following proposition follows from a result stated in Offerman et al (2002) as applied to our CPR setting:…”

“…The 'follow the exemplary' rule from Offerman et al (2002) is based on imitation of the subject that sets the good example from the perspective of group payoffs. The exemplary subject (or one of the subjects) is defined as the one whose effort level in the last round would give the highest sum of payoffs if all subjects had followed it.…”

“…The specific procedure is resumed below. Consider the following general level-1 model which accounts for different within and between-effects of the covariates, (20) where the intercept and slopes are subject-specific coefficients. The coefficient of the mean-centered covariate and the coefficient of the subject-mean are the within and between-effects of learning rule r, respectively.…”