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From Imitation to Collusion - A Comment

Oechssler, Jörg ; Roomets, Alex ; Roth, Stefan

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Abstract

In oligopoly, imitating the most successful competitor yields very competitive outcomes. This theoretical prediction has been confirmed experimentally by a number of studies. A recent paper by Friedman et al. (2015) qualifies those results in an interesting way: while they replicate the very competitive results for the first 25 to 50 periods, they show that when using a much longer time horizon of 1200 periods, results slowly turn to more and more collusive outcomes. We replicate their result for duopolies. However, with 4 firms none of our oligopolies becomes permanently collusive. Instead, the average quantity always stays above the Cournot-Nash equilibrium quantity. Thus, it seems that “four remain many” even with 1200 periods.

Item Type: Working paper
Series Name: Discussion Paper Series, University of Heidelberg, Department of Economics
Volume: 0588
Place of Publication: Heidelberg
Date Deposited: 14 Apr 2015 08:11
Date: March 2015
Number of Pages: 15
Faculties / Institutes: The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics
Subjects: 330 Economics
Uncontrolled Keywords: imitation, experiment.
Schriftenreihe ID: Discussion Paper Series / University of Heidelberg, Department of Economics
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