Kruse, Jamie Brown and Schenk, David J.

"Location, Cooperation, and Communication: An Experimental Examination"

JEL codes: D82, L10
Keywords: Spatial competition, Repeated games, Laboratory Experiments

Abstract:  The goal of this study is to examine freeform nonbinding communication and simplification as devices to facilitate cooperative outcomes. Our laboratory model uses a fixed price location choice duopoly in the spirit of Hotelling (1929). In addition to the rich decision framework of a full location model, we test an uncomplicated 2x2 model with similar Nash equilibrium predictions for the repeated game. In laboratory sessions with uncertain endpoint we use three different consumer distributions which made the joint profit maximum sustainable for different ranges of discount factors. Our result indicate that free form communication is a robust facilitator of joint profit maximizing outcomes.

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