Imitation and Belief Learning in an Oligopoly Experiment

We examine the force of three types of behavioral 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 CournotNash 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, behavioral rules, and outcomes. JEL codes: L13, C73, C91 Key-words: quantity-setting oligopoly game, imitation, belief learning, experiments Theo Offerman and Joep Sonnemans Jan Potters University of Amsterdam Tilburg University Department of Economics/CREED Department of Economics/CentER Roetersstraat 11 Warandelaan 2 1018 WB Amsterdam 5000 LE Tilburg Netherlands Netherlands Tel: 31-20-5254294 Fax: 31-20-5255283 E-mail: [email protected] [email protected] [email protected] * We are thankful for comments by participants of the Amsterdam Workshop on Experimental Economics and the meeting of the Economic Science Association, and by Rachel Croson, Charles Holt, Cars Hommes, Georg Kirchsteiger, and Rob Moir, in particular. Very constructive comments were provided by three referees. The research is made possible by a grant from the Netherlands' Organization for Scientific Research (to Theo Offerman) and a fellowship from the Royal Netherlands' Academy of Arts and Sciences (to Jan Potters).