Vecon Lab Price Competion Market: Introduction

This program sets up a "Bertrand market" in which participants compete in terms of price. The game highlights the severe competitive pressures that may result from price competition. You may choose between a homogeneous product (all sales go to the low-priced seller) or a setup with some heterogeneity, in which sales quantitity is a decreasing function of a seller's own price and an increasing function of other sellers' prices (strategic substitutes), or a decreasing function of others' prices (strategic complements). Buyer behavior is simulated, which speeds up the process. (The Posted Offer experiment, in contrast, puts participants into buyer and seller roles, and the Lemons Market experiment implements competition in terms of price and quality.)

Prices in laboratory experiments may lie above the harsh Nash/Bertrand prediction, especially for low numbers of sellers and fixed matchings, and the default setup implements a change from duopoly to oligopoly. For experimental evidence, see Chapters 8 and 9 of Holt (2006) Markets, Games, and Strategic Behavior (Addison-Wesley).

Vecon Lab - August 21, 2014