Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268721 
Year of Publication: 
2023
Series/Report no.: 
Hohenheim Discussion Papers in Business, Economics and Social Sciences No. 01-2023
Publisher: 
Universität Hohenheim, Fakultät Wirtschafts- und Sozialwissenschaften, Stuttgart
Abstract: 
Recent experimental simulations have shown that autonomous pricing algorithms are able to learn collusive behavior and thus charge supra-competitive prices without being explicitly programmed to do so. These simulations assume, however, that both firms employ the identical price-setting algorithm based on Q-learning. Thus, the question arises whether the underlying assumption that both firms employ a Q-learning algorithm can be supported as an equilibrium in a game where firms can chose between different pricing rules. Our simulations show that when both firms use a learning algorithm, the outcome is not an equilibrium when alternative price setting rules are available. In fact, simpler price setting rules as for example meeting competition clauses yield higher payoffs compared to Q-learning algorithms.
Subjects: 
pricing algorithms
algorithmic collusion
reinforcement learning
JEL: 
D43
D83
L13
L49
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
532.56 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.