Stackelberg beats Cournot: On collusion and efficiency in experimental markets

We report on an experiment designed to compare Stackelberg and Cournot duop oly markets with quantity competition. We implement both a random matching and a fixed-pairs version for each market. Stackelberg markets yield, regar dless of the matching scheme, higher outputs than Cournot markets and, thus , higher efficiency. For Cournot markets, we replicate a pattern known from previous experiments. There is stable equilibrium play under random matchi ng and partial collusion under fixed pairs. We also find, for Stackelberg m arkets, that competition becomes less intense when firms remain in pairs bu t we find considerable deviations from the subgame perfect equilibrium pred iction which can be attributed to an aversion to disadvantageous inequality .