This paper develops a quantal-response adaptive learning model which combines sellers' bounded rationality with adaptive belief learning in order to explain price dispersion and dynamics in laboratory Bertrand markets with perfect information. In the model, sellers hold beliefs about their...

We compare behavior in Weber's (2001) Dirty Faces Game with that in a modified version. The modifified version is designed to reduce the level of strategic uncertainty by ruling out some equilibria in weakly dominated strategies. We find that in the three-player version of the game reduced...

This paper proposes a quantal response learning model to explain sellers' pricing and learning behaviour observed in a laboratory Bertrand market experiment. In the model, sellers hold beliefs about their opponents' strategies and play quantal best responses to these beliefs. After each round,...

Weber (2001) uses the Dirty Faces Game to examine the depth of iterated rationality. Weber does not consider equilibria that contain weakly dominated actions. So he implicitly assumes that it is common knowledge that no one ever uses weakly dominated actions. We show that allowing for equilibria...

This paper analyses dynamic pricing in markets with network externalities. Network externalities imply demand inertia, because the size of a network increases the usefulness of the product for consumers. Since past sales increase current demand, firms have an incentive to set low introductory...