Social learning in market games

Abstract

Our experiments test the effect of different information settings on firms’ behaviour in duopoly price and quantity games. We find that when players have full information on their rivals’ choices, the imitation rule prevails, and such learning behaviour induces more competitive outcomes in the Cournot market designs. By the same token, when information on the average industrial profit is provided, there is evidence of an increase in cooperation, and the majority of players experiment with new strategies when their payoff falls below the average profit [Palomino, F., Vega-Redondo, F., 1999; Dixon, H.D., 2000].