This study provides a comprehensive picture of experimental Kreps-Scheinkman markets with capacity choice in the first stage and subsequent price competition at the second. We conduct seven different treatments of such markets, varying the number of firms, the demand rationing scheme, the...

In a vertical market experiment featuring a wholesale market and a retail market we investigate the countervailing power hypothesis of Galbraith (1952). Counter to standard models of imperfect competition this hypothesis proposes that increasing concentration of retail firms might be beneficial...

We use laboratory experiments to examine the effect of firm size asymmetry on the emergence of price leadership in a capacity constrained price-setting duopoly. With discounting, the unique subgame perfect equilibrium of the timing game we analyze predicts that the large firm is an endogenous...

This paper investigates why subjects in laboratory experiments on quantity precommitment games consistently choose capacities above the Cournot level – the subgame-perfect equilibrium. We argue that this puzzling regularity may be attributed to players’ perceptions of their opponents’...

This paper investigates why subjects in laboratory experiments on quantity precommitment games consistently choose capacities above the Cournot level - the subgame-perfect equilibrium. We argue that this puzzling regularity may be attributed to players’ perceptions of their opponents’ skill...

An experiment is designed to test the equilibria typically studied in the repeated game literature (i.e. those based on Nash reversion and optimal symmetric two-phase punishment strategies). One hundred pairs of subjects repeatedly set prices in a differentiated demand duopoly setting. Unlike...

The literature on product differentiation predicts that firms are likely to differentiate their products in order to relax price competition. We tested this theoretical result in a laboratory setting, by organizing twenty-four markets where products were offered with different quality levels. We...

Theoretical models of multidimensional product differentiation predict that in duopoly firms differentiate maximally along one dimension and minimally along the other dimensions. We experimentally reproduce a market in which firms can differentiate their products along two horizontal dimensions....

Bidders in procurement auctions often face avoidable fixed costs. This can make bidding decisions complex and risky, and market outcomes volatile. If bidders deviate from risk neutral best responses, either due to faulty optimization or risk attitudes, then equilibrium predictions can perform...

Commercialization of innovations frequently stumbles. A prominent recent example are the early (i.e. pre3G)mobile phone-enabled Internet services, whose European takeup was slower than expected. To determine why, we build a structural model of demand for such services and estimate it using...