Pricing behavior in asymmetric markets with differentiated products

R.J.A.P. Peeters; M. Strobel

doi:10.1016/j.ijindorg.2008.02.007

Pricing behavior in asymmetric markets with differentiated products

R.J.A.P. Peeters^*, M. Strobel

^*Corresponding author for this work

Microeconomics & Public Economics

Research output: Contribution to journal › Article › Academic › peer-review

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Abstract

We experimentally test Bertrand-Nash equilibria in markets with differentiated products. In contrast to the existing literature, we choose asymmetric market settings in which pure strategy equilibria do not exist. Our results show that Bertrand-Nash equilibria do remarkably well in predicting price distributions and comparative statics. Inaccuracies can be explained by boundedly rational decision-making. Other equilibrium concepts are not able to explain the data.

Original language	English
Pages (from-to)	24-32
Number of pages	9
Journal	International Journal of Industrial Organization
Volume	27
Issue number	1
DOIs	https://doi.org/10.1016/j.ijindorg.2008.02.007
Publication status	Published - 1 Jan 2009

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10.1016/j.ijindorg.2008.02.007

Cite this

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title = "Pricing behavior in asymmetric markets with differentiated products",

abstract = "We experimentally test Bertrand-Nash equilibria in markets with differentiated products. In contrast to the existing literature, we choose asymmetric market settings in which pure strategy equilibria do not exist. Our results show that Bertrand-Nash equilibria do remarkably well in predicting price distributions and comparative statics. Inaccuracies can be explained by boundedly rational decision-making. Other equilibrium concepts are not able to explain the data.",

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AB - We experimentally test Bertrand-Nash equilibria in markets with differentiated products. In contrast to the existing literature, we choose asymmetric market settings in which pure strategy equilibria do not exist. Our results show that Bertrand-Nash equilibria do remarkably well in predicting price distributions and comparative statics. Inaccuracies can be explained by boundedly rational decision-making. Other equilibrium concepts are not able to explain the data.

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