Duopoly Behavior in Asymmetric Markets: An Experimental Evaluation

Abstract

Experimental duopolies are analyzed to answer two questions: Are asymmetric duopolies less likely to collude than symmetric duopolies? Is the time it takes to reach an equilibrium affected by asymmetry? In a repeated game where output is the choice, we have data 19 (respectively, 21) subject pairs where both agents are low-cost (respectively, high-cost) and 25 subject pairs where one agent in high-cost and one is low-cost. Subjects make choices for at least 35 periods. Results indicate that asymmetric markets are less cooperative and take longer to reach equilibrium than symmetric markets.