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Market volatility and inequality in earnings: experimental evidence

Authors
Journal
Economics Letters
0165-1765
Publisher
Elsevier
Publication Date
Volume
70
Issue
3
Identifiers
DOI: 10.1016/s0165-1765(00)00391-8
Keywords
  • Oligopoly
  • Experiments
  • Inequality

Abstract

Abstract We analyze the volatility of actions in experimental oligopoly markets. Can the volatility, measured as the total variation in actions, be predicted by inequality in earnings of the previous period? We examine two types of differentiated markets, Cournot and Bertrand, and two informational conditions. We find for both types of markets and regardless of the information available to firms that inequality in earnings is a major factor for explaining volatility. The more equal profits are distributed, the less volatility is observed.

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