Information use and decision making in groups : a study of an experimental oligopoly market with the use of a business game

Sammanfattning: The purpose of this study is to take some steps towards a better understanding of how groups in firms use information in their decision making when competing in markets. A business game is used as an experiment, since it has the advantages that the playing of the game can be repeated many times, the decision making situation can be controlled and monitored, and the information in the game can be altered. The game used here deals with five firms, each with 2- 9 participants, competing on the same experimental oligopoly market by making repeated decisions on price, advertising, investments and production. Both students and professionals have played the game extensively during a decade. The market model in the business game has dynamic properties, with production capacity, stocks and long-term effects of advertising. Due to the relative complexity of the market model, optimal solutions for more than one period could only be computed numerically. The methods used for determining these optimal solutions are described, since they can also be useful when determining solutions in other market models. The optimal solutions to this model are compared to the decisions that the firms made when the business game was played. It was found that the dynamic non-cooperative (Nash) solution gives the best description for the decisions made in the games. In the experiments, different amounts of information were made available to the firms. The decisions differed depending on what information the firms had available. Additional information proved to have a positive value only when some, but not all, of the firms received this information. Furthermore, it was found that firms with the same amount of available information made different decisions. These differences in decisions could be explained by the decision making processes in the groups, but not by the compositions of the groups. The firms in the business game appeared rigid in their decision making. Even after the game had ended, they were committed to their earlier decisions even when these decisions had been less successful.