In the heterogeneous experimental oligopoly markets of this paper, sellers first choose capacities and then prices. In equilibrium, capacities should correspond to the Cournot prediction. In the experimental data, given capacities, observed price setting behavior is in general consistent with...

We compare the performance of liability rules for managing environmental disasters when third parties are harmed and cannot always be compensated. A firm can invest in safety to reduce the likelihood of accidents. The firm's investment is unobservable to authorities. Externality and asymmetric...