Capra, C. Monica, Goeree, Jacob K., Gomez, Rosario, and Holt, Charles A.,

"Predation, Asymmetric Information, and Strategic Behavior in the Classroom: an Experimental Approach to the Teaching of Industrial Organization"

JEL codes: C72, C92
Keywords: classroom experiments, multi-market games, asymmetric information, predatory pricing

Abstract:  Classroom market experiments can complement the theoretical orientation of standard industrial organization courses. This paper describes various experiments designed for such courses, and presents details of a multi-market game with entry and exit. In this experiment incumbents have a cost advantage in their "home" markets, and mobile firms decide which market to enter. After entry decisions are made, firms choose prices and quantities to offer for sale. Predatory pricing is possible with this setup, and the experiment can be used to motivate discussions of monopoly, competition, entry, and efficiency. Other classroom experiments with an industrial organization focus are surveyed.

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