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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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Find related papers by JEL classification:

• C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
• C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

References

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Citations

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Cited by:

1. Anders Poulsen & Jonathan Tan, 2007. "Information acquisition in the ultimatum game: An experimental study," Experimental Economics, Springer, vol. 10(4), pages 391-409, December.
2. 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.
3. Claude Meidinger & Marie-Claire Villeval, 2002. "Leadership in Teams: Signaling or Reciprocating ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00178474, HAL.
4. Poulsen, Anders, 2007. "Learning to Make Strategic Moves: Experimental Evidence," MPRA Paper 10927, University Library of Munich, Germany.
5. Hildenbrand, Andreas, 2010. "Cournot or Stackelberg competition? A survey on experimental evidence," MPRA Paper 24468, University Library of Munich, Germany.

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