Econometric Society 57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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INFERRING BUYER STRATEGIES AND THEIR IMPACT ON MONOPOLIST PRICING


Category: Econometrics
EMPIRICAL INDUSTRIAL ORGANIZATION
Monday 26th August 2002, 14:30 - 16:00, Room: 1.11
Session Chair(s): PFISTER Etienne , TEAM-CNRS-Université de Paris 1, FRANCE

Presenter(s): Engle-Warnick, Jim

Co-Author(s): Ruffle, Bradley

Keyword(s): binary tree classification, experimental economics, posted-offer market, strategic buyer behavior, strategy inference

JEL(s): C63, C91, D42

Abstract:

We infer unobserved strategies from the actions of buyers in posted-offer market economics experiments, with a new application of a Bayesian technique. We find that buyer strategies are effective as a counteracting response to monopoly power: market prices and monopolist profits are negatively correlated with strategy complexity. One strategy is particulary effective: the unconditional and intense forgoing of profitable purchases early in the game is more effective than punishments that trigger when the price exceeds a threshhold. We conclude that strategy inference provides new insights into strategic behavior, and should at least complement existing methods of statistical analysis.


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Paper Reference Number: 155

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57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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