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Noisy leadership: An experimental approach

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  • Guth, Werner
  • Muller, Wieland
  • Spiegel, Yossi

Abstract

We examine the strategic behavior of leaders and followers in sequential duopoly experiments in which followers either perfectly observe the leaders’ actions or else observe nothing. Our experiments show that consistent with the theory, leaders enjoy a greater …rst-mover advantage when followers observe their actions with higher probability. However, the results also show that (i) leaders do not fully exploit their …rst-mover advantage, (ii) when informed, followers tend to overreact slightly (i.e., choose quantities above their best-response to the leaders’ quantities), and (iii) when uninformed, followers try to predict leaders’ quantities and react optimally. This suggests that followers view the symmetric Cournot outcome as “fair” and whenever they observe leaders who are trying to exploit their …rst-mover advantage, they “punish” them by overreacting. Such punishments in turn induce leaders to behave more softly than the theory predicts.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 57 (2006)
Issue (Month): 1 (October)
Pages: 37-62

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Handle: RePEc:eee:gamebe:v:57:y:2006:i:1:p:37-62

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Web page: http://www.elsevier.com/locate/inca/622836

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Citations

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Cited by:
  1. repec:hal:cesptp:halshs-00178474 is not listed on IDEAS
  2. Anders Poulsen & Jonathan Tan, 2007. "Information acquisition in the ultimatum game: An experimental study," Experimental Economics, Springer, vol. 10(4), pages 391-409, December.
  3. Poulsen, Anders, 2007. "Learning to Make Strategic Moves: Experimental Evidence," MPRA Paper 10927, University Library of Munich, Germany.
  4. Tanja Hörtnagl & Rudolf Kerschbamer, 2014. "How the Value of Information Shapes the Value of Commitment Or: Why the Value of Commitment Does Not Vanish," Working Papers 2014-03, Faculty of Economics and Statistics, University of Innsbruck.
  5. S.N. O'Higgins & Arturo Palomba & Patrizia Sbriglia, 2010. "Second Mover Advantage and Bertrand Dynamic Competition: An Experiment," Labsi Experimental Economics Laboratory University of Siena 028, University of Siena.
  6. Hildenbrand, Andreas, 2010. "Cournot or Stackelberg competition? A survey on experimental evidence," MPRA Paper 24468, University Library of Munich, Germany.
  7. Anders U. Poulsen & Michael W. M. Roos, 2009. "Do people make strategic commitments? Experimental evidence on strategic information avoidance," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 09-01, School of Economics, University of East Anglia, Norwich, UK..
  8. Anders U. Poulsen & Michael V. M. Roos, 2009. "Do People Make Strategic Moves? Experimental Evidence on Strategic Information Avoidance," Discussion Papers 09-06, University of Copenhagen. Department of Economics.

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