Durable-Goods Monopoly: Laboratory Market and Bargaining Experiments
Volume: Volume 31, No. 2
Issue: Summer 2000
Pages: pp. 375-394
Authors: Stanley S. Reynolds
Title: Durable-Goods Monopoly: Laboratory Market and Bargaining Experiments
Abstract: Results from single-period monopoly experiments (nondurable environment) are compared with results from multiperiod experiments that have features of a durable-goods environment. Average prices were below the static monopoly benchmark price in all settings. Observed initial prices were higher in multiperiod experiments than in single-period experiments, in contrast to equilibrium predictions. Prices in multiperiod experiments tended to fall over time; there was less price cutting in market experiments than in bargaining experiments. There was substantial demand withholding by buyers in multiperiod experiments. A version of bounded rationality is a promising candidate for explaining deviations from equilibrium predictions.
JEL Classification
Market Structure, Firm Strategy, and Market Performance:
Monopoly; Monopolization Strategies cartels; collusion (L120)
Market Structure and Pricing: Monopoly (D420)
Durable Goods Monopoly
Equilibrium
Monopoly