Fostering Collusion Through Action Revision in Duopolies

We design an experiment to study the implications of allowing players to revise their actions in a Cournot duopoly game. Payoffs are determined only by the quantities selected at the end in a real-time revision game. On the other hand, in a stochastic revision game, opportunities to adjust quantities arrive randomly, and the quantities selected at the last revision opportunity are implemented. Contrasting results emerge: while real-time revision results in choices that are more competitive than the static Cournot-Nash, significantly lower quantities are implemented when revisions are stochastic. The results hold for different arrival rates of revision opportunities. Our findings demonstrate that the ability to revise actions can sustain partial cooperation. Although quantity adjustment choices display substantial heterogeneity, the main implication of the theory of revision games put forth by Kamada and Kandori (2020) is supported. © 2023 Elsevier Inc. All rights reserved.