Equilibrium selection in static and dynamic entry games
AbstractWe experimentally assess the predictive power of two equilibrium selection principles for binary N-player entry games with strategic complementarities. In static entry games, we test the theory of global games which posits that players play games of complete information as if they were playing a related global game of incomplete information. By contrast, in dynamic n-period entry games, the efficient subgame perfect equilibrium prediction is for all to enter whenever the payoff relevant state variable exceeds a certain threshold. The subgame perfect entry threshold of the dynamic game will generally differ from the global game threshold of the static version of the same game. Nevertheless, our experimental findings suggest that entry thresholds are similar between static and dynamic versions of the same game. An implication is that the modeling of entry games with strategic complementarities as static, one-shot games – ignoring the dynamic element of such interactions – may not be unreasonable.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 76 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/622836
Coordination problems; Entry games; Strategic complementarities; Speculative attacks; Equilibrium selection; Global games; Dynamic games; Subgame perfection; Experiments;
Other versions of this item:
- John Duffy, 2009. "Equilibrium Selection in Static and Dynamic Entry Games," Working Papers 376, University of Pittsburgh, Department of Economics, revised Dec 2011.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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