Killiam Research Enhancement Award
Microeconomics, Game theory
This paper tests the prediction of three discrete asymmetric duopoly price competition games in the laboratory. The games differ from each other in terms of the size of the cost asymmetry that induces a systematic variation in the difference between the firms’ marginal costs. While the standard theory requires the low-cost firm to set a price just equal to the high cost firm's marginal cost, which is identical across all three games, and win the entire market; intuition suggests that market price may increase with a decrease in the absolute difference between the two marginal costs. We develop a quantal response equilibrium model to test our competing conjecture,
© 2016 Western Economic Association International
This is the peer reviewed version of an article published in final form at https://doi.org/10.1111/ecin.12328. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving
Dugar, S., & Mitra, A. (2016). Bertrand competition with asymmetric marginal costs. Economic Inquiry, 54(3), 1631-1647.