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Stackelberg Beats Cournot: On Collusion and Efficiency in Experimental Markets
Steffen Huck, Wieland Müller and Hans-Theo Normann
The Economic Journal
Vol. 111, No. 474 (Oct., 2001), pp. 749-765
Stable URL: http://www.jstor.org/stable/798411
Page Count: 17
You can always find the topics here!Topics: Duopolies, Collusion, Efficient markets, Economic competition, Surplus, Market competition, Experimental results, Nash equilibrium, Economic profit, Economic models
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We report on an experiment designed to compare Stackelberg and Cournot duopoly markets with quantity competition. We implement both a random matching and a fixed-pairs version for each market. Stackelberg markets yield, regardless of the matching scheme, higher outputs than Cournot markets and, thus, higher efficiency. For Cournot markets, we replicate a pattern known from previous experiments. There is stable equilibrium play under random matching and partial collusion under fixed pairs. We also find, for Stackelberg markets, that competition becomes less intense when firms remain in pairs but we find considerable deviations from the subgame perfect equilibrium prediction which can be attributed to an aversion to disadvantageous inequality.
The Economic Journal © 2001 Royal Economic Society