Price competition under cost uncertainty : A laboratory analysis

@inproceedings{Abbink2002PriceCU,
  title={Price competition under cost uncertainty : A laboratory analysis},
  author={Klaus Abbink and Jordi Brandts},
  year={2002}
}
We study the relation between the number of firms and price-cost margins under price competition with uncertainty about competitors’ costs. We present results of an experiment in which two, three and four identical firms repeatedly interact in this environment. In line with the theoretical prediction, market prices decrease with the number of firms, but on average stay above marginal costs. Pricing is less aggressive in duopolies than in triopolies and tetrapolies. However, independently from… CONTINUE READING

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