Behavioral heuristics and market patterns in a Bertrand-Edgeworth Game
Date
2011-03
Authors
Heymann, Daniel
Kawamura, Enrique
Perazzo, Roberto P.J.
Zimmermann, Martín
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Journal Title
Journal ISSN
Volume Title
Publisher
Universidad de San Andrés. Departamento de Economía
Abstract
This paper studies price-setting behavior in a Bertrand-Edgeworth game, a traditional
setup that provides a stylized representation of real-world markets (such retail markets).
It explores methodological complementarities between analytical, experimental and agent-
based simulation approaches. The game under analysis only admits hard-to-characterize
mixed-strategy Nash equilibria. This paper uses families of heuristic rules for individual
behavior to analyze the resulting market prices. A set of laboratory experiments nds that
price-setting choices of agents are described reasonably well through a sales-based simple
pricing rule. Average market prices tend to converge from above to quasi-steady states
with small individual dispersion, occasionally disturbed by agents who search for pro ts by
raising prices. Salient features of the experimental outcomes can be represented through
simulations with arti cial agents who apply the sales-based heuristics with parameters
calibrated to the experiment.
Description
Fil: Heymann, Daniel. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Kawamura, Enrique. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Perazzo, Roberto P.J. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Zimmermann, Martín. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Kawamura, Enrique. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Perazzo, Roberto P.J. Universidad de San Andrés. Departamento de Economía; Argentina.
Fil: Zimmermann, Martín. Universidad de San Andrés. Departamento de Economía; Argentina.