Competitive behavior in market games: Evidence and theory
AbstractWe explore whether competitive outcomes arise in an experimental implementation of a market game, introduced by Shubik (1973) . Market games obtain Pareto inferior (strict) Nash equilibria, in which some or possibly all markets are closed. We find that subjects do not coordinate on autarkic Nash equilibria, but favor more efficient Nash equilibria in which all markets are open. As the number of subjects participating in the market game increases, the Nash equilibrium they achieve approximates the associated competitive equilibrium of the underlying economy. Motivated by these findings, we provide a theoretical argument for why evolutionary forces can lead to competitive outcomes in market games.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 146 (2011)
Issue (Month): 4 (July)
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Web page: http://www.elsevier.com/locate/inca/622869
Market games Full Nash equilibrium Market power Competition Experimental economics Evolutionary stability;
Other versions of this item:
- John Duffy & Alexander Matros & Ted Temzelides, 2008. "Competitive Behavior in Market Games: Evidence and Theory," Working Papers 366, University of Pittsburgh, Department of Economics, revised Mar 2009.
- Alexander Matros & John Duffy & Ted Temzelides, 2006. "Competitive Behavior in Market Games: Evidence and Theory," Working Papers 201, University of Pittsburgh, Department of Economics, revised Sep 2008.
- 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
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
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