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Dissertation Committee:
Levent Çelik (co-chair)
Peter Katuščák (co-chair)
Randall K. Filer
Andreas Ortmann
Avner Shaked

Abstract:

The dissertation is dedicated to two interconnected questions. First, I try to understand how consumers choose from a set of complex pricing schemes. I design two lab experiments that generate rich datasets allowing to address the question of interest. In the set of pricing schemes offered to subjects, one pricing scheme has a convex cost function at the possible demand range, while all other pricing schemes have linear cost functions at this range. I document a bias towards the pricing scheme associated with a convex cost function. The second question is to understand how the observed consumer behavior affects pricing decisions of profit-maximizing firms. I address this question by constructing a model where a monopolist can price discriminate against consumers with different willingness to pay and the same limited ability to compare market alternatives. In this model, it might be profitable for the monopolist to include dominated offers (i.e. such offers that are never chosen by rational consumers who can compare all available offers) in the menu of pricing schemes. The main result is the necessary condition for this pricing strategy to be profitable: consumers with a higher willingness to pay should be more likely to have dominated offers in their consideration set than consumers with a lower willingness to pay.

Full Text: “Boundedly Rational Consumers and Complex Pricing Schemes” by Natalia Shestakova

Prof. Steffen Huck

University College London, United Kingdom

Author(s): Steffen Huck

Abstract: 

Imitative behavior is a core element of the human repertoire of adaptive behaviors. In strategic contexts, imitation has theoretically been shown to lead to very competitive outcomes, for example the Walrasian outcome in Cournot games. These predictions have been confirmed in experiments.  However, previous experiments have typically not exceeded 60 rounds of play. We employ the new ConG software to increase number of periods dramatically,  up to 1,200. Behavior in the first 100 rounds is identical to what has been observed earlier. However, after 200 periods there are dramatic changes.
Subjects become strategically more sophisticated and learn to overcome imitation. Interestingly, they do so without understanding best-reply correspondences or playing Nash. Instead, they learn to employ
heuristics that implement effective repeated-game strategies. This ensure very high levels of collusion in duopolies. In triopolies there is more heterogeneity between different markets but collusion is prevalent in many of them.

Full Text NOT AVAILABLE YET