The effect of priming in a Bertrand competition game: An experimental study

In a Bertrand competition experiment, we study the impact of two cognitive primes on strategic behaviour at first encounter and over time. With this aim, instructions are slightly modified to imprint one of the two incentive features present in a standard Bertrand duopoly: the winning rule (competition) and the winner’s payoffs (cooperation). Therefore, under a between-subject design, we examine pricing behaviour in three treatments: a Competition Priming treatment, a Payoff Priming treatment and a non-priming Baseline. Taking the Baseline as benchmark, the results show that whereas priming for competition reduces significantly market prices from the beginning, priming for payoffs holds market prices at a significantly high level for a longer period. However, the effect of priming fades over time.