Template-type: ReDif-Paper 1.0
Author-Name: Peeters,Ronald
Author-Name: Strobel,Martin
Author-workplace-name: METEOR
Title: Differentiated Product Markets: An Experimental Test of Two Equilibrium Concepts
Abstract: In markets with differentiated products Bertrand-Nash equilibria in pure strategies may not exist. Mixed strategies are difficult to calculate. For these cases Morgan and Shy (2000) suggest an alternative solution concept, the undercut-proof equilibrium (UPE). While the Nash-equilibrium is motivated by the question of how ones own behavior influences one''s payoff, the UPE is motivated by the question of how others'' behavior influence one''s payoff. We report on an experiment where we test these two concepts with respect to their comparative statics. Moreover we investigate the nature of subjects'' underlying thinking process. Our results provide strong evidence against the UPE and in favor of Bertrand-Nash.
Keywords: microeconomics ; 
Series: Research Memoranda
Creation-Date: 2005
Number: 020
File-URL: http://arnop.unimaas.nl/show.cgi?fid=3410
File-Format: application/pdf
File-Size: 266752
Handle: RePEc:unm:umamet:2005020