Repeated Price Competition Between Individuals and Between Teams
Bertrand model, price competition, tacit collusion, experiments, group behavior
Psychology | Social and Behavioral Sciences
We conducted an experimental study of price competition in a duopolistic market. The market was operationalized as a repeated game between two “teams” with one, two, or three players in each team. We found that asking (and winning) prices were significantly higher in competition between individuals than in competition between two- or three-person teams. There were no general effects of team size, but prices increased with time when each team member was paid his or her own asking price and decreased when the team’s profits were divided equally. This result is consistent with a simple model of individual learning.
Bornstein, Gary; Kugler, Tamar; Budescu, David V.; and Selten, Reinhard, "Repeated Price Competition Between Individuals and Between Teams" (2008). Psychology Faculty Publications. 39.