Multiple Openings and Competitiveness of Forward Markets: Experimental Evidence.

Abstract

We test the competition enhancing effect of selling forward in experimental Cournot duopoly and quadropoly with multiple forward markets. We find that two forward periods yields competitive outcomes and that the results are very close to the predicted theoretical results for quantity setting duopolies and quadropolies. Our experiments lend strong support to the hypothesis that forward markets are competition enhancing. We then test a new market that allows for endogenously determined indefinitely many forward periods that only close when sellers coordinate on selling a zero amount in a forward market. We find that the outcomes under an endogenous close rule are also very competitive. These results hold for both duopolies and quadropolies.