Pricing Behavior in a Dynamic Duopoly: An Experimental Study

---

Tezin Türü: Yüksek Lisans

Tezin Yürütüldüğü Kurum: TED Üniversitesi, İktisadi Ve İdari Bilimler Fakültesi, Ekonomi Bölümü, Türkiye

Tezin Onay Tarihi: 2024

Tezin Dili: İngilizce

Öğrenci: Nejat Yılmaz

Danışman: Erdem Başçı

Özet:

This thesis experimentally explores the two pricing equilibria proposed by Maskin and Tirole (1988b): monopoly pricing via tacit collusion (kinked demand equilibrium) and the Edgeworth cycle. We designed a laboratory experiment, precisely following Maskin and Tirole (1988b), involving an alternating-move duopoly game in which subjects decide on the price level. Three treatments are conducted, differing in initial price and discount rate as the experiment parameters. Kinked demand equilibrium is tested as the null hypothesis and is rejected by price responses collected from the experiment. We also observe that the Edgeworth cycle is not prominent in the data to its fullest extent. The results reveal myopic pricing behavior, with subjects predominantly lowering prices to undercut rivals. Furthermore, convergence to the low v markup equilibrium is common in almost all treatments. Therefore, participants primarily follow a myopic Bertrand strategy, resulting in a low markup equilibrium over the marginal cost.

Keywords: Pricing behavior, imperfect competition, Maskin-Tirole model, tacit collusion, Edgeworth cycle.