Abstract

In this paper we analyze the Kirman and Vriend (2001) fish market model in detail. We investigate the robustness of the results by simulating the model 100 times and we open up the “black box” by studying the role of loyalty considerations in the sellers’ different decision rules. We confirm that the qualitative findings of the original paper are robust. However, we get some counter-intuitive results. We find that buyers become loyal to sellers even though sellers treat more loyal buyers negatively. We also find that price discrimination based on loyalty levels is disadvantageous for sellers as prices are lower and sellers make lower profit than without price discrimination. We show that this counter-intuitive result can be explained by differences in the speed of learning between the two cases.

Please contact Eva Levelt (e.m.levelt@uva.nl).if you have any questions about the lecture.

Location

Room E5.22