Template-Type: ReDIF-Paper 1.0
Author-Name: Tiziana Assenza 
Author-X-Name-First: Tiziana 
Author-X-Name-Last: Assenza
Author-Email: tiziana.assenza@unicatt.it
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore and CeNDEF, Amsterdam School of Economics, University of Amsterdam
Author-Name: Jakob Grazzini 
Author-X-Name-First: Jakob 
Author-X-Name-Last: Grazzini
Author-Email: jakobgrazzini@gmail.com
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore
Author-Name: Cars Hommes 
Author-X-Name-First: Cars 
Author-X-Name-Last: Hommes
Author-Email: C.H.Hommes@uva.nl
Author-Workplace-Name: CeNDEF,Amsterdam School of Economics, University of Amsterdam and Tinbergen Institute
Author-Name: Domenico Massaro 
Author-X-Name-First: Domenico 
Author-X-Name-Last: Massaro
Author-Email: D.Massaro@uva.nl
Author-Workplace-Name: CeNDEF, Amsterdam School of Economics, University of Amsterdam and Tinbergen 
Title: PQ Strategies in Monopolistic Competition: Some Insights from the Lab
Abstract: We present results from 50-rounds experimental markets in which firms decide
repeatedly both on price and quantity of a perishable good. The experiment is
designed to study the price-quantity setting behavior of subjects acting as firms
in monopolistic competition. In the implemented treatments subjects are asked to
make both production and pricing decisions given different information sets. We
investigate how subjects decide on prices and quantities in response to signals from
the firms' internal conditions, i.e., individual profits, excess demand, and excess
supply, and the market environment, i.e., aggregate price level. We find persistent heterogeneity in individual behavior, with about 46% of market followers, 28%
profit-adjusters and 26% demand adjusters. Nevertheless, prices and quantities
tend to converge to the monopolistically competitive equilibrium and we find that
subjects' behavior is well described by learning heuristics.
Length: 52
Creation-Date: 2014-03
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def011.pdf
File-Format: Application/pdf
File-Function: First version, 2014
Number: def011
Classification-JEL: 
Keywords: Laboratory Experiments, Price-Quantity Competition, Monopolistically
Competitive markets.
Handle: RePEc:ctc:serie1:def011