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Cooperative and competitive price bidding in a duopoly game
Author(s) -
Stech Frank J.,
McClintock Charles G.
Publication year - 1971
Publication title -
behavioral science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.371
H-Index - 45
eISSN - 1099-1743
pISSN - 0005-7940
DOI - 10.1002/bs.3830160605
Subject(s) - bidding , microeconomics , duopoly , dyad , economics , profit (economics) , dilemma , repeated game , unique bid auction , game theory , psychology , social psychology , auction theory , philosophy , epistemology , cournot competition
Nine dyads played 20 trials of a duopoly price bidding game. On each trial Ss submitted bids and received information about their own profits and the other's bid. Both Ss had identical cost and revenue functions and the payoff relation between dyad members was symmetrical. Over 60 percent of the price bids in the game were at or below the zero profit point and only 12 percent of the bids were at the cooperative maximally profitable price. Structurally and empirically the game had characteristics similar to the mixed motive Prisoner's Dilemma. Although Ss followed a strategy recommended by economic theory, the dilemma characteristics forced Ss to carry the strategy into the bid region below the lower limit suggested by economic considerations. Directions of bid shifts were strongly influenced by relative position (high or low bidder) on the previous trial and by both the player's own previous bid and the other's previous bid. Bids tended to shift gradually to the next higher or lower bid or were maintained and responses to other's previous bid showed a similar pattern. Ss in dyads who won more or lost less money than their partners chose lower bids and responded differently to bids than did the other dyad member. Bidding was used as a signalling channel to the other subject to overcome the lack of overt communication between dyad members.