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Sequential equilibrium in monotone games: A theory-based analysis of experimental data

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  • Choi, Syngjoo
  • Gale, Douglas
  • Kariv, Shachar

Abstract

A monotone game is an extensive-form game with complete information, simultaneous moves and an irreversibility structure on strategies. It captures a variety of situations in which players make partial commitments and allows us to characterize conditions under which equilibria result in socially desirable outcomes. However, since the game has many equilibrium outcomes, the theory lacks predictive power. To produce stronger predictions, one can restrict attention to the set of sequential equilibria, or Markov equilibria, or symmetric equilibria, or pure-strategy equilibria. This paper explores the relationship between equilibrium behavior in a class of monotone games, namely voluntary contribution games, and the behavior of human subjects in an experimental setting. Several key features of the symmetric Markov perfect equilibrium (SMPE) are consistent with the data. To judge how well the SMPE fits the data, we estimate a model of Quantal Response Equilibrium (QRE) [R. McKelvey, T. Palfrey, Quantal response equilibria for normal form games, Games Econ. Behav. 10 (1995) 6-38; R. McKelvey, T. Palfrey, Quantal response equilibria for extensive form games, Exp. Econ. 1 (1998) 9-41] and find that the decision rules of the QRE model are qualitatively very similar to the empirical choice probabilities.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 143 (2008)
Issue (Month): 1 (November)
Pages: 302-330

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Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:302-330

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Experiment Monotone games Refinements Pure strategy Mixed strategy Markov perfect Quantal response equilibrium;

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References

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  1. Gale, Douglas, 2001. "Monotone Games with Positive Spillovers," Games and Economic Behavior, Elsevier, vol. 37(2), pages 295-320, November.
  2. R. McKelvey & T. Palfrey, 2010. "Quantal Response Equilibria for Normal Form Games," Levine's Working Paper Archive 510, David K. Levine.
  3. Gale, D., 1992. "Dynamic Coordiantion Games," Papers 13, Boston University - Department of Economics.
  4. repec:att:wimass:9712 is not listed on IDEAS
  5. Bagnoli, Mark & Lipman, Barton L, 1992. " Private Provision of Public Goods Can Be Efficient," Public Choice, Springer, vol. 74(1), pages 59-78, July.
  6. Marx, Leslie M & Matthews, Steven A, 2000. "Dynamic Voluntary Contribution to a Public Project," Review of Economic Studies, Wiley Blackwell, vol. 67(2), pages 327-58, April.
  7. Admati, Anat R & Perry, Motty, 1991. "Joint Projects without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 259-76, April.
  8. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, vol. 1(1), pages 9-41, June.
  9. Aumann, Robert J. & Sorin, Sylvain, 1989. "Cooperation and bounded recall," Games and Economic Behavior, Elsevier, vol. 1(1), pages 5-39, March.
  10. Roger Lagunoff & Akihiko Matsui, . ""An 'Anti-Folk Theorem' for a Class of Asynchronously Repeated Games''," CARESS Working Papres 95-15, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  11. Lise Vesterlund & John Duffy & Jack Ochs, 2004. "Giving Little by Little: Dynamic Voluntary Contribution Games," Econometric Society 2004 North American Winter Meetings 402, Econometric Society.
  12. James Andreoni, 1998. "Toward a Theory of Charitable Fund-Raising," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1186-1213, December.
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Citations

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Cited by:
  1. Battaglini, Marco & Nunnari, Salvatore & Palfrey, Thomas, 2011. "Legislative bargaining and the dynamics of public investment," Discussion Papers, Research Unit: Market Behavior SP II 2011-205, Social Science Research Center Berlin (WZB).
  2. Steven A. Matthews, 2008. "Achievable Outcomes of Dynamic Contribution Games, Second Version," PIER Working Paper Archive 11-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 20 Jun 2011.
  3. Matthews, Steven A., 2013. "Achievable outcomes of dynamic contribution games," Theoretical Economics, Econometric Society, vol. 8(2), May.
  4. Choi, Syngjoo & Gale, Douglas & Kariv, Shachar & Palfrey, Thomas, 2011. "Network architecture, salience and coordination," Games and Economic Behavior, Elsevier, vol. 73(1), pages 76-90, September.
  5. Breitmoser, Yves, 2012. "Cooperation, but no reciprocity: Individual strategies in the repeated Prisoner's Dilemma," MPRA Paper 41731, University Library of Munich, Germany.
  6. Garcia-Rosa, Alfonso & Kiss, Hubert Janos & Rodriguez-Lara, Ismael, 2010. "Do Social Networks Prevent Bank Runs?," UMUFAE Economics Working Papers 9723, DIGITUM. Universidad de Murcia.
  7. Steven A. Matthews, 2006. "Smooth Monotone Contribution Games," PIER Working Paper Archive 06-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Benjamin Golub & Matthew O. Jackson, 2010. "Na�ve Learning in Social Networks and the Wisdom of Crowds," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 112-49, February.
  9. Sam Asher & Lorenzo Casaburi & Plamen Nikolov, 2011. "One Step at a Time: Does Gradualism Build Coordination?," Working Papers 1113, University of Namur, Department of Economics.
  10. Breitmoser, Yves, 2010. "Structural modeling of altruistic giving," MPRA Paper 24262, University Library of Munich, Germany.
  11. Tan, Jonathan H.W. & Breitmoser, Yves & Bolle, Friedel, 2010. "Voluntary Contributions by Consent or Dissent," MPRA Paper 22001, University Library of Munich, Germany.
  12. Steven A. Matthews, 2008. "Achievable Outcomes in Smooth Dynamic Contribution Games," PIER Working Paper Archive 08-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  13. Robert Kurzban & Mary Rigdon & Bart Wilson, 2008. "Incremental approaches to establishing trust," Experimental Economics, Springer, vol. 11(4), pages 370-389, December.

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