We present results from 50-rounds experimental markets in which firms decide repeatedly both on price and quantity of a perishable good. The experiment is designed to study the price-quantity setting behavior of subjects acting as firms in monopolistic competition. In the implemented treatments subjects are asked to make both production and pricing decisions given different information sets. We investigate how subjects decide on prices and quantities in response to signals from the firms[U+05F3] internal conditions, i.e., individual profits, excess demand, and excess supply, and the market environment, i.e., aggregate price level. We find persistent heterogeneity in individual behavior, with about 46% of market followers, 28% profit-adjusters and 26% demand adjusters. Nevertheless, prices and quantities tend to converge to the monopolistically competitive equilibrium and we find that subjects[U+05F3] behavior is well described by learning heuristics.

PQ Strategies in Monopolistic Competition: Some Insights from the Lab / T. Assenza, J. Grazzini, D. Massaro, C. Hommes. - In: JOURNAL OF ECONOMIC DYNAMICS & CONTROL. - ISSN 0165-1889. - 50(2015 Jan 01), pp. 62-77. [10.1016/j.jedc.2014.08.017]

PQ Strategies in Monopolistic Competition: Some Insights from the Lab

D. Massaro;
2015

Abstract

We present results from 50-rounds experimental markets in which firms decide repeatedly both on price and quantity of a perishable good. The experiment is designed to study the price-quantity setting behavior of subjects acting as firms in monopolistic competition. In the implemented treatments subjects are asked to make both production and pricing decisions given different information sets. We investigate how subjects decide on prices and quantities in response to signals from the firms[U+05F3] internal conditions, i.e., individual profits, excess demand, and excess supply, and the market environment, i.e., aggregate price level. We find persistent heterogeneity in individual behavior, with about 46% of market followers, 28% profit-adjusters and 26% demand adjusters. Nevertheless, prices and quantities tend to converge to the monopolistically competitive equilibrium and we find that subjects[U+05F3] behavior is well described by learning heuristics.
Laboratory experiments; Monopolistic competition; Price–quantity behavior;
Settore SECS-P/01 - Economia Politica
Settore SECS-P/02 - Politica Economica
Article (author)
File in questo prodotto:
File Dimensione Formato  
1-s2.0-S0165188914002061-main.pdf

accesso riservato

Tipologia: Publisher's version/PDF
Dimensione 922.9 kB
Formato Adobe PDF
922.9 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/820825
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 6
  • ???jsp.display-item.citation.isi??? 4
social impact