Price and quantity experimentation: A synthesis

This paper compares experimentation about product differentiation in a linear setting under four market structures: quantity-setting and price-setting monopoly, Cournot and Bertrand duopoly. Quantity-setting firms always experiment by raising their quantities and the monopolist experiments relatively more than the duopolists. A price-setting monopolist does not experiment. The value of information to Bertrand duopolists may be positive or negative depending on the degree of product differentiation. When information is valuable, price-setting duopolists experiment by lowering prices. A numerical example indicates that the intensity of experimentation is higher in a Cournot duopoly than in a Bertrand duopoly. (C) 2001 Elsevier Science BY All rights reserved.