Two-period duopolies with forward markets

Last registered on March 25, 2019

Pre-Trial

Trial Information

General Information

Title
Two-period duopolies with forward markets
RCT ID
AEARCTR-0003940
Initial registration date
February 22, 2019
Last updated
March 25, 2019, 9:58 AM EDT

Locations

Primary Investigator

Affiliation
Virginia Commonwealth University

Other Primary Investigator(s)

PI Affiliation
Paderborn University
PI Affiliation
Durham University

Additional Trial Information

Status
Completed
Start date
2015-10-30
End date
2015-11-27
Secondary IDs
Abstract
We experimentally consider a dynamic multi-period framework of a Cournot duopoly with a simultaneous option to engage in financial risk management and a real option to delay supply. The option to engage in financial risk management allows players to manage risk before uncertainty is realized, while the real option allows them to manage risk after uncertainty is realized. Due to the real option, our multi-period setting is not a mere repetition of a single-shot interaction. In such a setting, firms face a strategic dilemma: they must weigh the advantages of dealing with their risk exposure against the disadvantages of higher competition. In theory, firms consider the strategic impact of the hedging component, which enhances market competition. Our experimental results provide supportive evidence of this theory by suggesting that the hedging device significantly increases competition and negates duopoly profits even in a simultaneous setting.
External Link(s)

Registration Citation

Citation
Cox, Caleb, Arze Karam and Matthias Pelster. 2019. "Two-period duopolies with forward markets." AEA RCT Registry. March 25. https://doi.org/10.1257/rct.3940-4.0
Former Citation
Cox, Caleb et al. 2019. "Two-period duopolies with forward markets." AEA RCT Registry. March 25. https://www.socialscienceregistry.org/trials/3940/history/44111
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2015-10-30
Intervention End Date
2015-11-27

Primary Outcomes

Primary Outcomes (end points)
production, hedging, and sales decisions
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
There are two experimental conditions: Single Production and Double Production.

The Single Production condition is divided into three periods. In the initial period, each player make a production and hedging decision. In the second period, a demand state is realized, and each player observes the decisions of the other player and second-period profits. Players then make sales and hedging decisions. In the third period, another demand state is realized, and each player observes the decisions of the other player and third-period profits

The Double Production condition is similar to the Single Production condition, except that players make an additional production decision in the second period.
Experimental Design Details
Randomization Method
Randomization to experimental conditions is done in office by computer.
Randomization Unit
Groups of participants (sessions) are randomized to experimental conditions.
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
8
Sample size: planned number of observations
100 subjects
Sample size (or number of clusters) by treatment arms
Single Production: 52 subjects
Double Production: 48 subjects
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
Durham University Business School
IRB Approval Date
2015-10-19
IRB Approval Number
N/A

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
November 27, 2015, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
November 27, 2015, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
8 sessions
Was attrition correlated with treatment status?
Final Sample Size: Total Number of Observations
100 subjects
Final Sample Size (or Number of Clusters) by Treatment Arms
Single Production: 52 subjects Double Production: 48 subjects
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
No